Can my fiance file as head of household if she is claiming 2 dependents, even though I filed as head of household claiming 0? We do live together.

[gringoo27]

Fiance and I live together. In turbotax, I answered that the kids lived with us for 12 months, and that I had an agreement with the her that she is claiming them. Turbotax still gave me EIC and the kids on my taxes. IRS rejected her refund due to the SSNs being used on mine. I read that can happen electronically, and that we need to file hers via mail. Can she still file head of household when claiming the kids, even though I already did?

[Opus 17 · Accepted solution]

No, you goofed, plus Turbotax tricked you into making another goof.

First of all, only the person who pays more than half the expenses can claim HOH.  (And that person must claim at least one dependent.)  You can't both pay more than half, and if you each pay exactly half, no one gets to be HOH (one person only has to pay $1 more than the other toward your housing expenses).  So you shouldn't have even tried.  

Then, you have a dependent problem.  Turbotax does not do a good job with unmarried parents who live together, because they apparently think it is too delicate to ask that question.  When you get the question, "do you have an agreement" you have to answer NO, because that only applies to a legal court order between parents who live apart and share custody.  When you live together with the other parent, you aren't allowed to split the benefits of a dependent; one parent gets everything and the other parent gets nothing.  The parent who is not claiming a dependent should not even list them on their return.

You both filed wrong.  You filed first, and said you were giving the dependent to the other parent under a court order.  You claimed EIC and HOH, but not the child tax credit.  (You are not allowed to split these benefits).  Then, your fiancé tried to file as HOH which means she tried to claim the children as full dependents which would have entitled here to the child tax credit, HOH and EIC.

What to do

First, you need to decide how you want to file.  The parent who paid more than half the household expenses must claim at least one child to file as HOH.  The other child can be claimed by either parent, but that parent files as single.  I can't tell which way gives you the biggest tax refund overall, you will have to test different combinations.

Then, once you decide what to do, your fiancé prepares a return for her situation.  (Maybe single with no children, maybe single with one child, maybe she is HOH.)  Make sure she answers NO to the custody question.  If she is not claiming any children, delete them completely.  If she wants to claim no children she can e-file, but if she wants to claim one or both, she has to file by mail.

Then, after your refund is paid, you need to file an amended return.  If your fiancé is going to claim the children, you need to delete them, which will remove your EIC and HOH status and you will likely have to repay most of your refund.  If you are going to claim the children, re-run the dependent interview to answer NO to the custody agreement question so that you qualify for the full $2000 child tax credit.  Print your amended return and mail it in.

[gringoo27]

Thank you very much for that clarification. No expert with taxes, so that was very helpful.
So the goal is for her to claim the children. So she will claim HOH, and the dependents. She will file by mail, can we go ahead and mail it?
For me, I need to file an amendment, 1040X, change filing status to single, and remove the children altogether. The turbotax edition of 1040X isn't available yet(current estimate 3/7/19), can I do a paper form, or should I wait for the turbotax form?

[Opus 17]

For your fiancé's return, I would re-run the dependent interview and make sure you say NO to the custody agreement question.  Just to be sure she is getting the child tax credit and EIC and HOH.  She will need to sign and mail the return, that can be done any time.  Don't forget to also print, sign and mail the state return, since it probably can't be e-filed either.  (Unless the state accepted the return, which would be unexpected.)

You should wait to file the amended return until your first refund is paid. (If the IRS adjusts it for some reason, you will need to take that into account.)

An amended return is a 1040X cover page PLUS a complete copy of your (fixed) tax return will all necessary forms and attachments, not just the 1040X.  So unless you want to re-do the entire return by hand, I would plan to wait for the amending software to be released.   Although you should expect to pay back part or most of your refund, there won't be any interest or penalty charged as long as you file the amended return by April 15.  So there is no hurry.  

[gringoo27]

Thank you again! Luckily we live in Texas and don't have to worry about a state return!! You have clarified all my questions. Thank you very much.

[IreneS]

UPDATED FOR TAX YEAR 2019

No - You cannot both file as Head of Household.  One of you provides over one-half the cost to

maintain the household, even if by $1.  That person can file as Head of Household and the other has to file as Single.

For tax year 2019, you can qualify for Head of Household if you:

1. Were unmarried as of December 31, 2019 and
2. Paid more than half the cost to run your (or a qualifying parent's) home in 2019 (rent, mortgage, utilities, etc.) and
3. Supported a qualifying person.

Also, in order to file as Head of Household, you must have a dependent--either a qualifying child or a qualifying relative.  

[Edited | 4/13/2020 |  10:34 am PDT]