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 the head of household filing status, the child tax credit/credit for other dependents, the dependent care credit/exclusion for dependent care benefits, the dependency exemption and the EITC.
There is a special rule for divorced or separated parents or parents living apart for the last 6 months of the calendar year. A parent who has custody of the child (custodial parent) may provide the parent without custody (noncustodial parent) with a written declaration granting the noncustodial parent ability to claim dependency exemption and the child tax credit/credit for other dependents. 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 the child tax credit or credit for other dependents and the dependency exemption. However, only the custodial parent can claim the head of household filing status, the dependent care credit/exclusion for dependent care benefits, and the EITC for the child, 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 Pub. 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, Dependents, 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 that includes living with the taxpayer in the United States for more than half of the year. The special rule for divorced or separated parents allows only the noncustodial parent to claim the child as a dependent for the purposes of the child tax credit/credit for other dependents and the dependency exemption and does not apply to the EITC. For more information, see Publication 501, Dependents, Standard Deduction, and Filing Information.
Your client is probably not properly claiming the EITC. If parents are divorced and do not live together, the custodial parent may sign a release which allows the noncustodial parent to claim the child as a dependent and claim the child tax credit/credit for other dependents for the child, and dependency exemption, 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 his son as a qualifying child for the EITC.
If your client meets the income test and other requirements, they may be able to claim the self-only EITC.
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.
While in this situation, the children lived with each parent for more than half the year and all other requirements were met for them to be the qualifying children of both parents for the year, the spouses may claim the EITC only if they file a joint return because they don’t meet the special rule that allows married but separated spouses to claim the EITC without filing a joint return. The special rule requires that the taxpayer either lived apart from their spouse for the last 6 months of the year, or that the taxpayer was legally separated according to their state law under a written separation agreement or a decree of separate maintenance and lived apart from their spouse at the end of the year. See Publication 596, Earned Income Credit.
Because the couple in this example is still married, did not live apart for the last 6 months of the year, and was not legally separated under state law, neither spouse is eligible to claim the EITC unless they file a joint return with their spouse.
A married taxpayer may claim the EITC without filing a joint return with their spouse if they lived with a qualifying child for more than half of the year and meet either of the following two requirements:
- The taxpayer lived apart from their spouse for the last 6 months of the year, or
- Was legally separated according to state law under a written separation agreement or a degree of separate maintenance and lived apart from their spouse at the end of the year
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.