What Happens if Both Parents Claim a Child on Taxes?
Explore the implications and resolution process when both parents claim a child on their taxes, including IRS responses and potential penalties.
Tax season can be a challenging time for families, particularly when deciding who has the right to claim a child as a dependent. This decision has significant financial implications, including determining eligibility for tax credits and deductions that reduce taxable income.
Custody Arrangements
Determining which parent can claim a child often depends on custody arrangements. The IRS typically grants this right to the custodial parent, defined as the parent with whom the child resides for the majority of the year. This determination impacts access to benefits like the Child Tax Credit and the Earned Income Tax Credit. For instance, the 2024 Child Tax Credit offers up to $2,000 per qualifying child, a substantial financial benefit.
In cases where custody is equally shared, the custodial parent may waive their right by completing Form 8332, allowing the non-custodial parent to claim the child. This form must accompany the non-custodial parent’s tax return and can cover one or multiple years based on the agreement between the parents.
Tiebreaker Rules
If both parents claim the same child, the IRS applies tiebreaker rules to determine eligibility. The first factor is the relationship to the child. If one parent is the biological parent and the other is not, the biological parent has priority. If both are biological parents, the IRS considers adjusted gross income (AGI), granting the claim to the parent with the higher AGI. This approach assumes the higher-earning parent can better utilize the tax benefits.
Potential IRS Responses
When duplicate claims occur, the IRS flags the returns for review, leading to processing delays. Both parties receive a notice, such as CP87A, requesting resolution. This notice prompts parents to amend their filings or provide documentation supporting their claim.
The IRS may require evidence, such as school records or medical bills, to verify eligibility. Timely responses are essential to avoid complications, including audits. If the issue remains unresolved, the IRS may disallow both claims until sufficient proof is provided, impacting eligibility for related credits and deductions.
Possible Penalties
Claiming the same child improperly can result in financial and procedural penalties. The IRS may impose an accuracy-related penalty under IRC Section 6662, charging 20% on tax underpayments due to negligence. If a parent knowingly claims a child without entitlement, this penalty applies.
Additional consequences include interest on overdue taxes, calculated quarterly under IRC Section 6621, and failure-to-pay penalties under IRC Section 6651, which accrue monthly up to 25% of the unpaid amount.
Correction Process
To resolve duplicate claims, parents must follow IRS procedures and amend filings when necessary. Typically, the IRS notifies both parents of the duplicate claim. The parent not entitled to claim the child must submit an amended return using Form 1040-X to correct the dependent information. Acting quickly can help avoid interest or penalties.
If disputes persist, the IRS enforces tiebreaker rules and may request detailed evidence, such as school or medical records, to determine eligibility. Providing documentation promptly is crucial to avoid delays. Consulting a tax professional can help ensure compliance and reduce complications.