What Happens if the Wrong Parent Claims Child on Taxes?

Claiming a child as a dependent offers financial advantages, including credits and deductions that reduce tax liability. When multiple individuals claim the same child, complications with the Internal Revenue Service (IRS) can arise. Understanding these rules is important to avoid errors and ensure correct benefits.

Understanding Child Tax Benefits and Eligibility

Claiming a child requires meeting specific IRS criteria for a “qualifying child.” A child must generally meet five tests: age, relationship, residency, support, and joint return. The age test requires the child to be under 17 for the Child Tax Credit, or under 19 (24 if a full-time student) for dependency. The relationship test specifies the child must be your son, daughter, stepchild, foster child, brother, sister, half-brother, half-sister, stepbrother, stepsister, or a descendant of any of them.

The residency test requires the child to live with you for over half the year. Under the support test, the child cannot provide over half their own support. The joint return test stipulates the child cannot file a joint return, unless only to claim a refund of withheld or estimated tax.

When multiple individuals, especially separated or divorced parents, could claim the same child, the IRS applies “tie-breaker rules.” If parents lived apart for the last six months, the child is generally the qualifying child of the parent with whom they lived longer. If the child lived with each parent for the same time, the parent with the higher adjusted gross income (AGI) can claim the child.

Claiming a qualifying child unlocks tax benefits, such as the Child Tax Credit, which reduces tax liability. Another benefit is the Earned Income Tax Credit, supporting low-to-moderate income working individuals and families. Additionally, a taxpayer may claim Head of Household filing status, offering a more favorable tax rate than single filing, if they pay over half the cost of keeping up a home for a qualifying person.

IRS Actions When Both Parents Claim

The IRS uses automated systems to detect duplicate child claims. When identified, the agency acts to resolve the discrepancy and determine the rightful claimant.

The IRS typically sends notices to both taxpayers. CP87A informs taxpayers a dependent was also claimed by another. If unresolved or more information is needed, the IRS may issue a CP75 or CP05 notice, requesting documentation. These notices usually provide 30 days for response.

Failure to resolve the claim through correspondence can lead to an audit. The IRS examines documentation, including residency, school enrollment, and support contributions, to determine the correct claimant.

If the IRS determines an incorrect claim, consequences follow. This includes disallowance of tax benefits, like the Child Tax Credit or Earned Income Tax Credit, resulting in additional tax owed. The IRS may also impose penalties for underpayment, plus interest. Penalties can include a 20% accuracy-related penalty if due to negligence.

Correcting a Claim

If a taxpayer incorrectly claimed a child or receives an IRS duplicate claim notice, the error is corrected by filing an amended tax return. Form 1040-X allows corrections to income, deductions, credits, or dependent information on a previously filed return.

To complete Form 1040-X, taxpayers need original return information. They must indicate changes, like removing the dependent, and explain the reason. The form requires recalculating tax liability based on corrected information, which may increase tax owed or decrease a refund.

Taxpayers typically submit Form 1040-X by mail. While some amended returns can be filed electronically, many require paper submission. Attaching supporting documentation is advisable, especially when responding to an IRS notice.

Taxpayers who proactively discover an error should amend their return promptly to avoid penalties and interest. If an IRS notice is received, responding within the timeframe with a corrected return or requested documentation is crucial. Maintaining thorough records, including copies of original and amended returns and IRS correspondence, is recommended. If the incorrect claim results in an over-refund, the taxpayer must repay the excess to the IRS, often with interest from the original due date.

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References
Internal Revenue Service. Publication 501, Dependents, Standard Deduction, and Filing Information.
Internal Revenue Service. What is the Child Tax Credit?.
Internal Revenue Service. Publication 504, Divorced or Separated Individuals.
Internal Revenue Service. Understanding Your CP87A Notice.
Internal Revenue Service. Understanding Your CP75 Notice.
Internal Revenue Service. Understanding Your CP05 Notice.
Internal Revenue Service. Accuracy-Related Penalty (Underpayment of Tax).