If my son's father claims him instead of me what are the benefits/reprimands?

[cuzaloa]

my sons father has never claimed our son on his taxes, i have been claiming him this whole time, and he wants to this coming tax year. would it benefit if his father claims him since he earns more and wants to claim him to lower his tax liability/get a bigger return or should i continue to since i earn less and would get a bigger child tax return to put away for our son? I'm a little worried that if he does claim him the government will punish both of us and our son will get a smaller return. we also do not want to do joint taxes

[Opus 17]

You can't file a joint return unless legally married.

If you are married filing separately and both parents live with the child, either parent can claim the child as a dependent.

If you are unmarried but live together with the child, either one of you can claim the child (or children) as dependents. If the parent who claims the child as a dependent also pays more than half the expenses of keeping up their home, they can file as head of household instead of single, which is slightly more favorable.  The other parent should not even list them in Turbotax, because there are some poorly worded questions that confuse some people.

If you are unmarried or never married and live apart and share custody, then:

The parent with whom the child lives more than half the year (184 or more 184 nights for 2016) is automatically entitled to claim the child as a dependent. This is the custodial parent. (IRS determines custody based on where the child lives, not any court order or agreement.)  The non-custodial parent is not entitled to claim anything.

However, the custodial parent can sign a release (form 8332) allowing the non-custodial parent to claim the child as a dependent.  You can download this form from the IRS web site.  The custodial parent signs it and gives it to the non-custodial parent and the non-custodial parent mails it to the IRS after e-filing the rest of their tax return.  In this case, the non-custodial parent can claim the dependent exemption and the child tax credit.  The non-custodial parent can never claim earned income credit, the dependent care credit (day care credit) or use the child to qualify for head of household status.  Those benefits always stay with the custodial parent.

[Opus 17]

Following up, there are no "reprimands" as long as you follow the rules.  However, let's say that the child lives most of the year with you, and the non-custodial parent claims the child as a full dependent including earned income credit or the dependent care credit or head of household--as if the child lived there more than half the year when he really didn't.  The penalty in that case can be a monetary penalty for filing an inaccurate return, repayment of excess refund plus interest and a late payment penalty, and automatic ban from claiming earned income credit for 2 years.

If the other parent is non-custodial and claims the dependent exemption under the terms of the form 8332, it is important that the non-custodial parent carefully answer the dependent interview questions in Turbotax so that the correct benefits are claimed and improper benefits are not claimed.

[VolvoGirl]

The main question is - are you married?  Do you live together?

[cuzaloa]

not married, live together. he pays rent i pay for all of our sons expenses.

[SweetieJean]

"our son will get a smaller return"  How old is he, and does he have income of his own?

[cuzaloa]

he's three, but whatever i get from the child tax return i put away into his 529, so i see it as "his return"

[Opus 17]

"refund"; a "return" is your proof of income that calculates the refund.

If you are unmarried living together, how to pay the least tax can be complicated.  Because the father pays more than half of the household expenses (rent, food, etc.) then the father could use head of household status if he claimed the child as a dependent.  That has lower tax rates.  You can only use the filing status "single" -- if you have been claiming head of household, you've probably been doing it wrong.

On the other hand, if you qualify for earned income credit and the father does not, that may result in your refund being larger than the refund he would get if he claimed the child and head of household.

The only way to know exactly which is better is to test is both ways.  You would need 4 tax returns;
mother single no dependent + father HOH with dependent
mother single with dependent + father single no dependent

Since you will end up filing two returns, I recommend buying Turbotax Deluxe as a CD or downloadable installer and installing it on your own computer.  You have to pay up front, but the desktop version can prepare and e-file up to 5 returns for the same original price.  (There is an extra fee for state e-filing, but you can skip this fee by printing your state returns and mailing them in.)  With the desktop version you can also make different test files since each tax return is a separate document.  (Only file one per person when you decide what to do.)

Turbotax online charges a separate fee for each return and is not cost-effective if you have more than one return to file, unless you qualify to file for free.

[SteamTrain]

....if you mean that whatever you get from the Child Tax Credit, or EIC on your own tax return....and it is those $$ you put into a 529 account for the child.....then, yes, you would need to discuss that with the other parent about how those particular $$ are to be handled before you change your procedures, because one, or both of those credits will show up on his tax return if you switch.

......( assuming that the other parent in this houshold can leagally include the child on his tax return).... if you truly trust your significant other to give you back those to put into the child's 529 account, or puts them there directly himself, then it shouldn't make too much differnece.   But, you would both have to test prepare each of your 2016 tax returns both ways to see if there truly is any advantaage to switching.    So much depends on exactly how much each of you earns, that we can't really tell you which way is most advantageous for your situation.

[cuzaloa]

I earn <7k (full time college student) and he earns about 25k