Tax season is unpleasant for many Kentucky residents. However, it can provide even more challenges for parents who have recently divorced. Claiming dependents on a tax return is relatively simple for married parents, but things can get a bit more complicated for those who have split up.
For example, tax credits like the Child and Dependent Care Tax Credit, the Child Tax Credit and the Earned Income Credit can save taxpayers a great deal of money on their returns. Unfortunately for divorced or separated parents, those credits can only be claimed by one of them. That means that ex-spouses need to reach an agreement on who will claim the credits or ask the Internal Revenue Service to determine who will get to claim the credits.
Under tax credit tiebreaker rules, the IRS gives preference first to parents over non-parents, then to parents who live with the children most of the year, and then to parents who have the highest adjusted gross income, or AGI. In cases where neither taxpayer is the parent and neither parent attempts to claim the credit, the taxpayer with the highest AGI gets preference. In situations where unmarried parents live together with the children all year, the IRS allows the parents to choose who will claim the credits. It should be noted that the IRS does not automatically apply tiebreaker rules to tax returns. Instead, the first parent who files his or her tax return gets the credits. If the other parent objects, he or she must contact the IRS for assistance.
The end of a marriage can be complicated and emotional for parents. However, a family law attorney could represent a parent’s interests and negotiate fair agreements on important legal matters, including child custody, child support, alimony, and property division. Legal counsel could also draft an agreement on who will file for dependent tax credits.