Filing federal income tax returns can be a complex process, which is why many people seek assistance from accountants or tax service companies. Certain life changes may also cause you to change the way you file your taxes. For instance, if have recently filed for a divorce and are a parent, you and your ex must determine which parent is eligible to claim your children as dependents on tax returns.
The Internal Revenue Service will not allow both parents to claim your children as dependents. This is why you must seek clarification of tax laws ahead of time to ensure that you fill out your returns properly. Otherwise, there could be significant delays in your refund, or worse.
Can you split tax benefits between parents following a divorce?
Perhaps you and your former spouse are doing your best to achieve a fair settlement and to treat each other respectfully and fairly, especially regarding your children. You might think it would benefit you both to split the exemption on your taxes, meaning that each of you would receive a portion of the benefits. The IRS allows only one parent to file the child dependent exemption. You cannot share the benefits. It is typically the custodial parent who claims children as dependents on federal tax returns.
What if child custody is shared 50/50?
If you and your ex share physical custody of your kids, it can be tricky to determine which of you is eligible to claim them as dependents on your tax returns. The primary means for doing so is to calculate the number of nights the children have spent in each household. If one parent has had the kids for more nights, that parent can claim “Head of Household” status and file the children as dependents on his or her federal income tax forms.
It’s possible that both parents have had custody of their children for an equal number of nights, in which case eligibility to claim them as dependents is then based on adjusted gross income. The parent with the greater amount is the one to claim the exemption. On page 11 of IRS Publication 504, there are additional rules for “breaking a tie” when parents are having trouble figuring out who should claim children on taxes following a divorce.
Tax returns sometimes spark legal disputes between divorced parents
When divorced parents disagree about who should claim children as dependents on tax returns, the “first come, first served” rule comes into play. If you claim your kids and send in your tax return, but your ex has already done the same, the IRS will only accept the first return it received if both of you have claimed the children. If you believe your ex is not entitled to claim an exemption for your kids, you can take legal steps to resolve this child custody issue.