It happens far too often. After you carefully negotiated an agreement about who gets to claim your child for tax purposes, your ex disregards the arrangement. Or your ex simply claims tax benefits that they were never legally entitled to have.
What can you do in these situations? The answers depend on several different factors, but it can be helpful to consult your family law attorney to help resolve problems and take steps to avoid a repeat in the future.
Timing Matters
The IRS handles tax returns electronically with software that will automatically reject an attempt to claim a child with a Social Security number that has already been submitted, regardless of which parent has the legal right to claim the child. While there may be situations where a dual filing gets through initially, such as when a return is submitted by mail, rest assured, the IRS will flag the problem. It is important to address the issue before penalties can be assessed.
Don’t forget about your Virginia tax return. If your ex has not yet filed a state return, it may be possible to correct the error for state purposes. If both parents claimed a benefit like the Child and Dependent Care deduction for the same child, then you will need to make corrections with the Virginia Tax agency as well as the IRS.
Look at the Situation from the Perspective of the IRS
The IRS does not care whether you and your ex signed an agreement specifying that you would take turns claiming tax benefits for a child or that the noncustodial parent would get tax benefits in exchange for paying more child support. Instead, the tax agency will apply their rules to the situation.
A tax benefit such as the Child Tax Credit cannot be split between parents. Generally, IRS rules grant benefits like that tax credit to the parent with primary custody. If both parents try to claim the same benefit, the agency will review regulatory factors to determine which parent is entitled to that benefit.
While the IRS does not care what your divorce decree says about tax arrangements, it will, however, pay attention to an official waiver of tax benefits. If the parent who would otherwise be entitled to the benefit signs a Form 8332 Release of Claim and then tries to claim that child anyway, the IRS should deny the benefit.
How to Handle the Tax Returns
The method for handling the problem depends on the situation. If your ex has filed wrongfully and you have evidence that the IRS will find persuasive—meaning that you have a release of claim form or can demonstrate status as the custodial parent—then you might want to file your return by mail. Be sure to include your documentation.
It may take time for the IRS to discover the duplication and investigate. Be prepared to submit duplicate copies of evidence showing that you are entitled to the benefits.
If you do not have a signed release of claim form and are not the custodial parent, and have not yet filed your return, it is probably best to file without claiming the child, unless you can persuade your ex to file an amended return. If you end up taking the loss, your attorney may be able to assist in negotiating a written agreement to make up the financial difference, such as an extra claim in future years or a monetary payment or asset transfer. If you both have already submitted returns claiming the same benefit and you do not have the right standing to claim the benefit by IRS standards, it is a good idea to file an amended return quickly to decrease the impact of any penalties and interest.
To avoid similar problems in the future, try to file your taxes as early as possible. Also, always make sure you have written proof of your arrangements, including any forms required by the IRS.
Work with an Experienced Family Law Attorney
Dealing with an ex can be challenging at best. Often when trying to resolve emotionally charged issues such as those involving children and finances, it helps to have an experienced family law attorney do the talking on your behalf. To learn how the dedicated legal team at DiPietro Law Group, PLLC may be able to assist in your situation, contact us today for a confidential consultation.