The tax season is upon us. With that, millions of Americans are in the midst of completing tax returns in anticipation of that all important tax refund. Part of the benefit of having children is being able to claim the Child Tax Credit, which can reduce one’s federal income tax by nearly $1000 for each child under the age of 17.
However, for divorced and separated parents, the allocation of the Child Tax Credit can be a bothersome and contention experience.
Under federal law, a child may be claimed as a dependent on a tax return if he or she lives with a parent for more than half the year. This may become a touchy issue if a court order awards primary custody to one parent, but the order isn’t followed because of unforeseen circumstances (i.e. a debilitating injury or illness) and the child ends up living with the other parent for an extended amount of time.
This may create a situation where one parent may claim the credit because of the order, while the other parent can make the claim based on changed circumstances.
Another difficult situation occurs when a non-custodial parent claims the child on his or her taxes and files the return before the custodial parent can do so. The second parent’s return may be rejected, causing additional discord and paperwork to be submitted to the Internal Revenue Service to prove that a parent is actually eligible to claim the credit.
To avoid these situations, the help of an experienced family law attorney is essential in crafting language to specify how the Child Tax Credit may be claimed and allocated.
Source: IRS.gov – Ten Facts about the Child Tax Credit, February 10, 2011