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Head of Household and EIC

Technical topics regarding tax preparation.
#1
Dbertke  
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I have a client with two children who divorced in December 2019. The divorce decree says that the mother is to claim dependency exemption for one child and the father should claim dependency exemption for the other. However, it also states that the mother is entitled to claim all credits related to both children. This is a shared custody agreement, where the kids are supposed to split time 50/50 between the parents.

The question that I have is that the mother is eligible for EIC. The attorney is trying to tell me that it is possible for both the mother and father to claim HOH and the mother to still claim both kids for EIC purposes. Right now I disagree. Even if they had worked it out so that each parent were able to argue that one of the children spent more than half of the year with them and both were able to claim HOH status. I don't think it's possible for the mother to claim EIC on the child that is being used to establish the father's HOH filing status.

Am I wrong with this? Does the fact that they were married and living together for more than half of 2019 make this work for 2019 only?

Your insight is appreciated.
 

#2
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Your interpretation is correct. For either parent to file HOH, at least one of the children had to reside in the parent's home OVER half the year. For EIC, the child had to live with the parent OVER half the year. So while each parent could, maybe, have had one of the children more nights than the other since two children are involved, it is not possible for that child to be in two places at one time. So if the child is a HOH qualifier for one parent because s/he stayed more nights with that parent, the other parent would not qualify for EIC for that child.

To reiterate, both parents can only file HOH (and get EIC) if one child stayed with one parent the greater number of nights and the other child stayed with the other parent the greater number of nights. When there is a shared physical custody arrangement where the children rotate where they stay, they usually, not always, stay with each parent on the same nights. Parents generally tend to be more flexible with these arrangements with older children. It really is going to come down to counting the nights with each parent.

All of this assumes all other tests for HOH and QC are met.

Of course, the custodial parent (the one with the greater number of nights) can always sign an 8332, but this would not qualify the other parent for HOH unless there is another HOH qualifying child. If the custodial parent signs an 8332, the custodial parent still has an HOH qualifying child and an EIC qualifying child. The other parent would get the CTC for that child.
 

#3
Frankly  
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Dbertke wrote: The divorce decree says ...

The divorce agreement might talk about where the kid(s) live, how they visit one another, who pays for what, and the like. It has no relevance as to how filing status, exemptions and credits are handled on the tax return. You file the tax return based on what actually took place. Pubs 501, 596, and 972 are informative.
 

#4
Dbertke  
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Thanks for your reply. That was the conclusion I was coming to for 2020 and years going forward.

What are your thoughts for 2019 if they were all living under the same roof for 6 months? I still think the IRS is going to throw a reject if it sees the same social security number being used to support an HOH filing and EIC on two separate returns.
 

#5
Dbertke  
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Frankly wrote:
Dbertke wrote: The divorce decree says ...

The divorce agreement might talk about where the kid(s) live, how they visit one another, who pays for what, and the like. It has no relevance as to how filing status, exemptions and credits are handled on the tax return. You file the tax return based on what actually took place. Pubs 501, 596, and 972 are informative.



I understand and I agree with you. The client is presenting me with the facts that both the mother and father housed one of the kids for greater than 50% of the year so both should be eligible for HOH. I am fine with that, but I believe that the father using one of the kids to claim HOH status and the mother using the same kid for EIC are mutually exclusive. Unless the fact that they were all living together for at least 6 months before the divorce changes this.
 

#6
Frankly  
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Dbertke wrote:... the mother using the same kid for EIC ...
Is is possible that the same child could live for more than six month in each of two separate households in the same tax year?
 

#7
EZTAX  
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Need more info. When did one of them move out? Actual date please.
 

#8
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Frankly wrote:
Dbertke wrote:... the mother using the same kid for EIC ...
Is is possible that the same child could live for more than six month in each of two separate households in the same tax year?


Look to whoever had the child/children for the greater number of nights during the year to establish the custodial parent for that child. That is the parent who can sign the 8332 to allow the other parent to claim the child.

So if they lived together until September, the custodial parent will still be the one with whom the child spent the greater number of nights. That child would not qualify the non-custodial parent for HOH.
 


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