When you’re providing your relatives, kids, or partner with the financial support out of the money you make, the government of the USA acknowledges that and gives tax credits to such individuals.
To claim several tax credits, you must claim your kids or partner, not your spouse, as a dependent child or relative. Sounds simple, right?
It’s not as simple as it sounds! You have to prove your eligibility and relationship with the dependent before you claim them on your tax return.
Usually, the disputes between parents regarding claiming a kid as dependent arises when both parents file separate returns or have parted ways. In some circumstances, anyone other than parents might also claim your child as a dependent.
What should parents do in either case when someone else claims their child as a dependent? What are your options if it was your turn to file your child as a dependent but your spouse did it?
We will guide you about everything and anything you can do to claim your child on your return rightfully.
So let’s get into it.
Who Is Dependent?
In general, a dependent person is described as one who depends on someone else for financial support and the cost of living.
The definition of the IRS for the dependent person is also the same as someone who needs the support of a taxpayer to pay for living expenses, food, education, etc.
However, IRS has also given very clear criteria about who can be claimed as a dependent on the tax return of an individual filing the return.
According to the IRS, their parents can claim children as dependents. However, a taxpayer cannot claim his spouse as a dependent even if the spouse is financially dependent on the taxpayer.
How Does IRS Define Dependent For Claiming On Tax Return?
A qualifying child or a qualifying relative, as mentioned above, can be claimed on the tax return. Here is the definition and conditions for each:
You can claim a child as a dependent if the criteria of the qualifying child are met. Here are the questions, and if the answer to every question matches your circumstances, you have the right to claim such a child as your dependent.
- How is the child related to you? Your son, daughter, sibling, stepchild, foster child, brother/sister, half brother/sister, stepbrother/sister, adopted child, or child of any of the mentioned relatives can be claimed as a dependent.
- Do they live with you? Your child must have spent more than half a year with you to qualify as your dependent for tax purposes.
- Does The Child Meet Age Requirement? If the age of the child is under 19 or under 24 in case a full-time student. For permanently and fully disabled children, there’s no age limit.
- Do you support your child for financial needs? If a taxpayer is paying more than half of the child’s financial support, whether having a job or not.
- What Is The Residency Status Of a Child? He must be a resident, citizen, or national of the USA, or a resident of Canada or Mexico.
- Is anyone else who has the right to claim your child as a dependent? If the parents have separated or divorced, this question applies to such parents. Any of the parents might go and claim the child as a dependent. Therefore, IRS has developed a tiebreaker rule to define the rights of parents and which parent can be claimed as a dependent
For claiming a relative as your dependent, they must meet the criteria as specified by the IRS. Here are some questions and the answers which must match your circumstances to define a qualifying relative on your return:
- How are they related to you? An adult child can be claimed as a dependent under a qualifying relative if he is a biological/adopted child, descendent, half-sibling, stepchild, foster child, or stepsibling. A taxpayer can claim his parents, grandparents, aunt/uncle, mother or father-in-law, niece/nephew, son or daughter-in-law, stepparent, brother or sister-in-law
- Do they live with you? The relative who has lived with you for the whole tax year can be dependent. Also, he must be on the list of relatives who do not live with you as specified in Publication 501.
- What Is Their Annual Income? The annual income of the dependent relative must not exceed $4300 for 2020 or 2021.
- Are You Providing Them The Financial Support? The taxpayer must provide more than half the financial support of the dependent relative.
- Are you the only person claiming them? One person can’t be claimed on two tax returns. Therefore, make sure that no one else is claiming the dependent relative as their taxpayer. It can lead to a situation that we are discussing in this article.
Benefits Of Claiming Your Dependent On Tax Return
Why would parents claim their kids a dependent? What benefits can they claim from the IRS?
Here is a small description of the benefits taxpayers can have by claiming their dependents:
- If you filed the tax return for the years prior to 2018, every dependent on your tax return would make you eligible for the personal exemption of $4050. However, the introduction of the Tax Cut and Jobs Act 2017 has ruled out claiming personal exemption on dependents for tax years 2018 to 2025.
- If you’re claiming your child or qualifying relative as a dependent, you will be entitled to the tax deductions and credits such as:
- An increased amount of standard deduction
- A large Child Tax Credit( it can be worth up to $3600 for every qualifying child under six and up to $3000 for children between 6 and 17 during the tax year 2021)
- If you don’t meet the residency requirements, you can claim additional Child Tax Credit for up to $1400.(Such taxpayers are not entitled to fully refundable enhanced Child Tax Credit).
- You can claim credit for other dependents(qualifying relatives) up to $500 for every qualifying dependent
- Earned Income Tax Credit
- Child and Dependent Care Credit
- Medical Expenses and other credits related to children or family issues
What If Your Partner Claimed Your Kid As Dependent When It Was Predecided?
This scenario is common among divorced or separated parents. If you found that your ex already claimed your child on his return, you can still go for the legal procedure. But it’s only possible if you’re a custodial parent of your child.
You must have full custody of the child, and he must also fulfill the dependent criteria. Besides, you must have the signed and legal agreements with your partners where he has relinquished his right to claim the child as his dependent or given you an unopposed right to claim your child as the dependent.
Besides, there is an IRS Tiebreaker rule as well.
IRS Tiebreaker Rule
IRS tiebreaker rule specifies the conditions when a child can be claimed as dependent whether married, separated, or divorced parents:
- For married couples who filed a married joint return, they can claim their child as a dependent
- If one parent in the couple who is the only parent of the child can claim him/her as dependent
- A child with two persons as parents who do not file a married joint return can be claimed by the parent with whom the child resided for a long time during a tax year.
- For a child with two persons who do not file a joint return and a child who has resided with both parents for an equal time during the tax year, AGI is assessed for determining claiming criteria. The parent who has a higher Adjusted Gross Income has the right to claim the child.
- If both parents of a child do not claim him as a dependent, a qualifying relative with the highest adjusted gross income can claim him as his dependent
- If the parent having legal custody wants to relinquish his rights to claim the child as a dependent, he will file From 8332(release/revocation of the release of claim to exemption for child). The other parent can claim the child unopposed in that case.
What If Someone Other Than Parents Claim Your Kid As Dependent?
We already discussed if there’s a dispute between parents for claiming a kid as a dependent. But what if another person other than the parents claims the kid as his dependent?
If a wrong person has claimed your child as his dependent, you are supposed to file an IRS tax return by mentioning the correct dependents and mail the return to the IRS.
If anyone has done this by identity theft or wrongfully, they will lose the case, and parents will get the right to claim their child as a dependent. In most cases, the next step is an audit by the IRS, and the person who claimed the child as a dependent has to prove the eligibility.
Tiebreaker tests, document checks, and question/answer sessions are conducted to determine the rightful claimants of a kid by the IRS.
We have discussed what you need to do when there’s a dispute between two parents to claim a kid as dependent or when someone else claims your kid as a parent.
We will try to cover the topic in a complete blog post. If you have any other questions related to claiming dependent, refunds, or filing tax returns, you can post them here.