I'm the stepmother to three kids. over the years, there have been a variety of placement arangements between their biological mother and father, but as of august 2017 the official parenting agreement is the kids live with their dad full time. their mother is supposed to pay child support (although hasn't been). they did live with us the full year of 2018. We plan to claim all three as dependents on our taxes.
Yesterday their biological mother texted us, telling us she plans to claim one of the children..based off an older parenting agreement from when things were 50 50. it had stated that. the newest agreement has changed to dad having primary placement and theres no language about taxes because inherently it should go to dad who has them full time. she claims we are wrong and that the "old" agreement should still stand. we told her we had the kids the entire year. there's a new parenting arrangement that we have them primary. she still thinks she is owed one of them as a dependent since the older document stats that. is there anything i'm missing here? would there be any exception that she is owed to mark them as a dependent?
Coffee Drinker2018-12-19T19:26:21Z
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The IRS doesn't give a rat's rear end what the custody agreement says (that goes for the old one and the new one). They also do NOT give a flying fork whether or not someone is paying child support.
Tax law, as set by congress and signed by various presidents, dictates that dependency claims, (and other tax benefits which stem from dependency such as child tax credits), are based on residency - meaning where the child ACTUALLY lives and sleeps. The children live in your house, therefore you and your husband are the only people with a valid claim on relevant tax benefits. You are legally the children's "custodial parent" and the Mother who did not live with the children in 2018 is the "Non-custodial parent." You will find these terms in the official IRS publications on this subject.
Your husband could give the biological mother *some* tax benefits for one or more of the children by signing form 8332. This would give her the dependency exemption (which is now worth $0) and the child tax credit (which is now worth up to $2,000 per child). She can NOT claim head of household status, earned income credit or childcare credit for those children - those last 3 benefits remain with the custodial parent no matter what, and can never be legally transferred to the non-custodial parent.
This method of giving away some benefits to the non-custodial parent using form 8332 is 100% optional and the IRS NEVER requires anyone to do it. A court can order you to do it as part of a custody arrangement, but the courts would enforce it, not the IRS. And since your latest custody arrangement is silent on the topic of taxes you can safely assume that there is no obligation for your husband to sign away the tax benefits which legally belong to him (and you).
I suggest your file your tax return as early as possible this year. This is not a situation where the first one to file wins, but it still makes life easier. IF you file first your return goes through and you should get your refund. If bio-mom tries to claim a child her return will be rejected, in many cases parents who are trying to steal an exemption will just give up and file without the child which solves all your problems. If she does dispute your claim with a paper return you will probably already have your refund while the IRS investigates. On the other hand if she files first you will have to mail a paper return to dispute her claim on the children, and any portion of your refund which comes from the disputed child(ren) will be held by the IRS while they investigate - which could easily take 3 months or longer.
Either way, you will win and get all of your refund and she will get nothing (and possibly penalties) for her illegal claim. Its just easier and faster if you get your return into the e-file system before she does.
File your taxes before her. Hers will reject and she will have to prove she can claim the child. But it she sends the old documentation that will send your return to audit and you just send the new order showing she is not allowed to claim the child.
The IRS decides who will get to claim the child tax credits and earned income credit - the dependent exemptions you took last year and any time before that have been eliminated.
Read IRS Publication 501 to see if you and the kids meet ALL of the tests for them being your qualifying children. If you do, claim the credits you're entitled to and the sooner you file, the better. She can do whatever she wants. The IRS will disallow anything she isn't entitled to, and they don't care about 'agreements', old or new. If she files before you do, you will not be able to file electronically, you will have to file a paper return, and any refund you have coming will probably be delayed for months while the IRS investigates and makes their decision.
Go ahead and claim them. The IRS doesn't care what the court agreement says. If she tries to claim anyone, the IRS will send letters to each of you asking for any explanation. If you read the definition of "dependent" in the IRS Pub 501, you will see she is entitled to nothing. Your husband can choose to give up exemptions, but he's under no obligation to do so.
While the new document should have clarified taxes to dispel a situation like this she is stretching it since in court a judge would agree with you. The IRS would also will side with you in this case because the kids lived with you and the IRS does not follow family court orders, however to alleviate a potential dispute you need to make sure you file before she does.
That said the rules for claiming dependents have changed DRASTICALLY for 2018 and depending on your situation you may not even have any benefit claiming the 3rd child, so if you really care to do her any favors you should have an accountant review your situation before you force it.