The following are questions preparers frequently ask about who may claim the EITC if the child's parents are divorced or separated or live apart at all times during the last 6 months of the calendar year.
Generally, only one person may claim the child as a qualifying child for purposes of head of household filing status, the child tax credit, the dependent care credit/exclusion for dependent care benefits, the EITC, and the dependency exemption.
There is a special rule for divorced or separated parents or parents who live apart for the last 6 months of the calendar year. If the requirements of the special rule are satisfied, then the child is treated as the qualifying child of the noncustodial parent for purposes of claiming the dependency exemption and the child tax credit while the custodial parent may claim the child as a qualifying child for the other child-related tax benefits, i.e., the dependent care credit and EITC, under the general rules.
For more information, see Applying the tiebreaker rules to divorced or separated parents (or parents who live apart) in Pub. 501 and Special rule for divorced or separated parents (or parents who live apart) in Publication 596. Generally, the custodial parent is the parent who has physical custody of the child for the greater portion of the calendar year. See Publication 501, Exemptions, Standard Deduction, and Filing Information, for more information.
Divorced parents have joint custody of a child and the marital settlement agreement by the court provides for the parents to alternate claiming the child as a dependent. How does this affect the EITC? Is the parent who is entitled to claim the child as a dependent also entitled to the EITC if the parent's income warrants it?
The parents may only alternate claiming the EITC from year to year if they change the pattern of who has physical custody of the child each year. To be a qualifying child of a taxpayer for the EITC, the child must meet a residency test. The special rule for divorced or separated parents or parents who live apart at all times during the last 6 months of the calendar year does not apply to the EITC. For more information, see Publication 501, Exemptions, Standard Deduction, and Filing Information.
Your client is probably not properly claiming the EITC. If parents are divorced, the custodial parent may release a claim to exemption for a child, which allows the noncustodial parent to claim the child as a dependent and claim the child tax credit for the child, if the requirements are met.
To claim the EITC, generally, the child must have lived with the taxpayer in the United States for more than half of the year. If the residency requirement for a qualifying child is not met, your client may not claim the EITC by claiming his son as a qualifying child.
To document that a child meets the residency requirement to be a qualifying child for the EITC, refer to Form 886-H-EIC. The form is also available in Spanish. The IRS sends this form with audit letters. The form has information on the documentation the IRS accepts to prove age, relationship, and residency.
As a preparer, you are not required to review a copy of the documentation, but informing your client about what's needed in case of an audit is a best practice. If you do review a document and use the information to determine eligibility for or to compute the amount of the EITC, you must keep a copy of the document in your records.
The wife may only claim the EITC if she files a joint return with her husband and they meet all other qualifications. Her permissible filing statuses are Married Filing Jointly or Married Filing Separately. She is not eligible for the EITC if she chooses to file separately. See Publication 596, Earned Income Credit.
Because the couple is still married and did not live apart for the last six months of the year, she is not considered unmarried for purposes of qualifying Head of Household filing status. See Publication 501, Exemptions, Standard Deduction, and Filing Information for more information on qualifying for Head of Household filing status.
A married taxpayer can be considered unmarried and file as Head of Household only if all the following tests are met:
- The taxpayer files a separate return.
- The taxpayer provided more than fifty percent of the cost of maintaining a home.
- His or her spouse was not a member of the taxpayer’s household in that home during the last six months of the year.
- The home was the main home of the taxpayer’s child, stepchild, or eligible foster child for more than half of the year.
- The taxpayer is entitled to claim the child as a dependent, or would have been so entitled except that the taxpayer released a claim to exemption for the child under the special rule for divorced or separated parents discussed above.
The IRS no longer accepts a copy of a divorce decree to show who has the right to claim a child as a dependent if the decree was executed after December 31, 2008. A noncustodial parent who claims the child as a dependent must file Form 8332 or a substantially similar statement with the return or, with Form 8453 for an electronic return.
If the divorce decree was executed before January 1, 2009, the IRS may accept certain pages of the divorce decree as a substitute for a Form 8332 if the decree unconditionally provides that the noncustodial parent may claim the child as a dependent, the custodial parent signs the decree, and the decree otherwise conforms to the substance of Form 8332.