Notice 2014-7, shared custody

Technical topics regarding tax preparation.
#1
Posts:
381
Joined:
25-Apr-2014 10:30am
Location:
Portland, Oregon
New client. My client got divorced in 2019. Since the divorce my client and his ex have lived in different homes (for obvious reasons). They split the parenting time of their 19 year old son who long ago was diagnosed with autism. My client states that per the divorce agreement, his parenting time split is 40/60, and the ex gets to claim the child as a dependent on a yearly basis. The state pays him and his ex for the care of the child -- payments that would normally be excluded from income taxation under 2014-7, being that the care takes place in each of their respective homes.

My question: Does the income he gets paid by the state for the child's care still qualify for exclusion from taxation under 2014-7 even though the child moves between homes? Since the child is living more than 50% of the time with the ex, does my client not qualify for this benefit?
 

#2
Posts:
381
Joined:
25-Apr-2014 10:30am
Location:
Portland, Oregon
Anyone? :)
 

#3
EZTAX  
Posts:
1608
Joined:
24-Apr-2014 6:48pm
Location:
California
You will have to review the 2014-7 carefully. Money paid for person living with you is tax-free as I am sure you know. Not sure if 50% is relevant to this. Maybe reach out to payer and inquire? Some of our clients have been able to sign documents attesting to their living with client and then no W-2 is even issued.
 

#4
Posts:
381
Joined:
25-Apr-2014 10:30am
Location:
Portland, Oregon
Interesting...hadn't heard of the W2 not being issued after documents being signed.
Yeah, my main sticking point is 50% thing -- not even 50% really, but just whether if the child isn't deemed to be living with the the care provider full-time whether the income should be excluded. I'll definitely have to dive back into the notice. Looked at the FAQ on the notice and it doesn't quite address the question.
Thanks for your input!
 

#5
Kris S  
Posts:
111
Joined:
18-Mar-2020 11:11pm
Location:
Southern California
There is also a Q & A for the notice.

https://www.irs.gov/individuals/certain ... rom-income

Also, are both parents getting a W-2? Or only 1 parent?
 

#6
Posts:
381
Joined:
25-Apr-2014 10:30am
Location:
Portland, Oregon
Kris S,
yep I went through the Q and A and didn't find the answer to this exact question :/
The parents are divorced, but according to my client, he believes that both of them are getting W2s.
 

#7
Kris S  
Posts:
111
Joined:
18-Mar-2020 11:11pm
Location:
Southern California
I don't know the answer but I have done a few of the returns with difficulty of care payments so I was interested in others responses.

In Q & A A6, The exclusion only applies to payments for care in the individual care provider’s home where the care recipient lives under the recipient’s plan of care.

Could you get a copy of the recipient’s plan of care? If Oregon says the plan of care is split between parents then it would bolster your case to exclude the payments.
Last edited by Kris S on 29-May-2020 11:29am, edited 1 time in total.
 

#8
Posts:
381
Joined:
25-Apr-2014 10:30am
Location:
Portland, Oregon
Hmm...not a bad plan at all. I'll look into that! Thanks!
 

#9
EZTAX  
Posts:
1608
Joined:
24-Apr-2014 6:48pm
Location:
California
Kris- great idea! Well done.
 


Return to Taxation



Who is online

Users browsing this forum: DAJCPA, dave1040, Google [Bot], Google Adsense [Bot], JoJoCPA, jon, MilesR, Seaside CPA, SumwunLost, Tangled Web, taxp2345, TheGrog, Wiles, WiscoTax and 180 guests