Posted by James Financial Services Inc

What If Someone Else Claims Your Dependent?

What If Someone Else Claims Your Dependent?

There are situations in which multiple parties claim the same dependent. For example, in divorced cases, a child may be claimed as a dependent by both parents. In general, only one person (or a couple filing a joint return) can benefit from the tax benefits resulting from claiming anyone's dependent.

These tax benefits include:

  • Child and dependent care tax credit

  • Child dependency exemption

  • Child tax credit

  • Credit for other dependents

  • Earned Income tax credit

  • Exclusion of employer-provided child care benefits.

  • Head of household tax filing status


Who can claim a dependent?

In general, only a taxpayer can claim a person as a dependent on the tax return (except, of course, in the case of a couple who files a joint tax return). If you file your tax return and someone else has already claimed your dependent, the IRS will apply the tiebreaker rules to determine who claims the dependent. To avoid any of these conflicts, consult a tax professional to determine if you qualify to claim someone as your dependent on your 2020 tax return due on tax day. 


Tax Tip: This is a good reason to electronically file your return early. Once a return requesting a specific dependent has been accepted, the IRS will reject any subsequent electronically filed return claiming the same dependent. However, having an IRS accepted return with a dependent is not confirmation that the taxpayer is qualified to claim that dependent. In other words, if you have submitted your return electronically with your dependent on the return, anyone else who claims the same dependent will be rejected.

There may be an exception when the sharing of tax benefits for a dependent is detailed in a divorce decree. Suppose you have such a decree issued after December 31, 2008. In that case, you will need to complete the tax return on paper and attach the divorce decree's corresponding pages, including the first and signature pages. If the order was issued before January 1, 2009, the IRS would not accept it. However, if you are a non-custodial parent claiming the child as a dependent, you have two options:


Multiple Support Declaration: To identify any other eligible person who may claim the dependent, a signed statement from the eligible person waiving the right to claim that person as a dependent will be required before you can add Form 2120, Multiple Support Declaration during the preparation and electronic filing of the tax return. If you have previously requested a return, you may need to submit Form 2120 to the IRS. For situations where the same child may be eligible to be claimed as a dependent or qualified child by more than one person, the IRS will apply a series of tiebreakers to determine who is eligible to claim the dependent. As soon as the IRS receives both returns requesting the same dependent, it will use the tiebreaker rules below.


Issuance of Child Exemption Claim: You or the other party may transfer the right to claim a child as a dependent. To revoke a child's claim as a dependent so that a non-custodial parent can claim the child or revoke a prior release to claim a child as a dependent, you can complete Form 8332. The non-custodial parent must also obtain a copy of the form completed by the custodial parent and attach it to the income tax return, which must be submitted on paper. If you change your mind at any time and want to revoke the waiver on the request, you can simply complete another Form 8332. Include Form 8453 when you file your Form 8332 tax return to the IRS.

 

If these options do not apply to you, consider the following steps.


What if your dependents have already been claimed?

Review these steps if you filed your tax return electronically, and it was rejected because someone, like an ex-spouse or identity theft, has already claimed one or more of your dependents in their tax return. Please note that an accepted tax return does not guarantee that you will also have the right to claim the dependent on that return.

 

Actions to be taken after someone incorrectly or fraudulently claims your dependents

Suppose you prepared and filed your tax return electronically, and the IRS rejected it with the message that one or more dependents were already claimed on another taxpayer's tax return. Or you received the IRS notification CP87A or CP75A because the IRS received a tax return from someone claiming a qualified child as a dependent with the same Social Security number as the dependent listed on the return income.


General information on fraudulent tax returns: If you believe you have been a victim of identity theft, you can request a copy of a fraudulent claim using Form 4506-F.

The steps below apply more if a tax return incorrectly claimed your dependents or if you incorrectly claimed dependents.

  • Find out who qualifies as a dependent by talking to a tax professional.

  • Gather dependent supporting documents and complete Form 866-H-Dep.

  • If you have a divorce judgment, please attach the relevant pages of the judgment (including the first page and the signature page) to the declaration by mail.

  • For example, it may be necessary to include copies of child care records (authenticate them), school records on the official school letterhead, medical records from the health care provider, Social service records from the social service agency, information from the place of worship that shows names, addresses, and dates. Include a letter with any other information that you think will help the IRS.

  • Get your tax return, income, and withholdings (W-2, 1099, etc.) and form 866-H-Dep. Then send all documents to the IRS based on the address listed on your tax return. 

  • If you only claimed the earned income tax credit for your child, but the IRS sent you an audit letter requesting more information, you will need to submit Form 886-H-EIC and attach all the documents on the form that prove the EITC claim. 

  • As soon as the IRS receives your documents, it will review the return with the claimed dependent and yours and apply the tiebreaker rules according to some predefined criteria. The process can take 8 to 12 weeks.

If you find that you have incorrectly reported a dependent on an IRS-accepted tax return, you will need to file a tax amendment or Form 1040-X and remove the dependent from your tax return.


 

IRS tiebreaker rules

Under the IRS tiebreaker rules, a child is generally considered a qualified child if the following conditions apply:

  • A couple or parents prepare and file a joint income tax return and declare that the child is a qualified dependent.

  • Only one parent, who is also the child's parent, considers the child to be qualified or dependent.

  • If the child has two parents and the two parents do not file jointly, the parent with whom the child has lived or lived the most during a fiscal year will qualify to claim.

  • If the child has lived or lived with each of their parents for the same period during the fiscal year, the parent with the highest adjusted gross income (AGI) will be able to claim. Without a joint return, both parents claim the child on their respective return.

  • If no parent claims the child, the person with the highest AGI qualifies over any parent who may have been able to claim the child, such as a stepfather or a qualified parent.

  • Due to the second tiebreaker rule (residence), the parent who has legal custody of a child is usually the parent who can claim the child in the event of divorce or separation. Suppose you are the custodial parent and wish to waive the waiver and assign it to the non-custodial parent. In that case, you can do so by completing Form 8332.


FOR INFORMATION ON HOW JAMES FINANCIAL SERVICES, INC. CAN BEST HELP YOU WITH YOUR TAX FILING NEEDS, PLEASE CLICK THE BLUE TAB ON THIS PAGE.


THANKS FOR VISITING.

James Financial Services Inc
Contact Member