There is a
special rule in the case of divorced & separated (including never married) parents.
When the non-custodial* parent is claiming the child as a
dependent/exemption/child tax credit; the custodial parent is still allowed to
claim the same child for Earned Income Credit, Head of Household filing status,
and day care credit. This "splitting of the child" is not available
to parents who lived together at any time during the last 6 months of the year;
then only one of you can claim the child for any tax reasons. The tax benefits
may not be split in any other manner.
Note in particular
that the non-custodial parent can never claim the Earned Income Credit, Head of
Household filing status or the day care credit, based on that child,
even when the custodial parent has released the exemption to him.
So,
it's good idea to let the other parent know that you will be claiming those
items, as many first time divorced parents are not aware of this rule and may
try to claim those items, which will cause the IRS to send out letters.
Ref: http://www.irs.gov/publications/p17/ch03.html#en_US_2014_publink1000170897
Scroll down to "Children
of divorced or separated parents (or parents who live apart)"
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When the non-custodial parent is claiming the dependent, you, the custodial parent, working through
the dependent interview need to carefully answer several questions:
·
When asked if your child's other parent will claim him/her this
year per legal agreement, answer yes (the other parent will claim the child).
·
When asked if the child lives with you more than 1/2 of the
year, answer yes.
·
When asked if you have a custody agreement, divorce decree or
other written agreement, answer yes (presumably, TurboTax treats Form 8332 as
an "other written agreement."
In doing so,
TurboTax will include the children on your return for EIC, Head of Household if
applicable and dependent care credit only.
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*The IRS goes by physical custody, not legal
custody. Furthermore, For tax purposes, there is no such thing as
joint custody, regardless of what your legal
agreement says. The requirement, to be
custodial parent, is that the child live with you MORE than 50% of the time. One of you has
to be the custodial parent and the other the non-custodial parent.
