Who's kid

[Taxpreparer]

Parents say they have joint custody. Kid lives with each parent exactly the same amount of time each year. (right). Dad want to take HH status and dependent care exp. Mom want kid as dependent and child tax credit. Does this work? I think it does, but next year they want to switch roles. Do they need some attachments to return>?

[jainen]

Don't play

Don't play their game. They way they are putting it up, neither one has a qualifying child and they can't claim anything.

What are you doing about your conflict of interest in talking to both of them?

[Don B]

Don't Ya

just love these cute little moves?

[Brian EA]

Hey, you can send one of them to me

[Unregistered]

Parents say they have joint custody. Kid lives with each parent exactly the same amount of time each year. (right). Dad want to take HH status and dependent care exp. Mom want kid as dependent and child tax credit. Does this work? I think it does, but next year they want to switch roles. Do they need some attachments to return>?

I agree with jainen. When I get the "exactly 50/50" line, I say

"Well, that makes it easy. If neither of you has custody over 50% of the year, neither gets the exemption"

Watch how quickly they solve the problem for you.

[jainen]

I don't use the word

I don't use the word "custody" any more. In the tax office, it doesn't mean what anybody expects it to mean.

[Bees Knees]

Conflict of interest

You should never agree to prepare both parent's tax returns, unless they are married and live together. Even if they say it is OK.

YOU will end up eventually being sued by one when things don't go their way.

[BP.]

who stays/who goes?

I've become used to declining to prepare a return when the couple splits, but this occasional occurence has become more common for me. What criteria do you use to determine who you'll cut and who you'll keep? First to book appt. the year they split? The one you had before they married? The least combative party? (Reading Matt's mind- the one with the higher tax prep fee? Smile) I want to go from ad hoc decision making to a more formal policy I can use. Thanks!

[Bees Knees]

One way to do it is to write a formal letter to both the minute you find out they split, explaining that due to conflict of interest issues, you cannot provide services for both. You would like to give them the opportunity to make the decision. You will assume the one who returns a signed engagement letter will be the one you will provide services for.

Send the engagement letter along with both letters and expect the one who still wants your services to sign, date, and return the letter to you. If both happen to return a signed engagement letter to you at the same time, flip a coin and return the one who lost along with a letter stating you already have engaged the other person.

[BP.]

So simple, and so sensible . . . thank-you, Bees!

[Matt Sova]

Bp

Although I do like the higher fee idea, I do not always go that route. Neighbor of mine came in back in Nov. crying her eyes out because her husband (who has become a friend of mine and has a corporation) just served her with divorce papers the night before. This came 2 weeks after they found out she was pregnant with their 3rd child. He, apparently, wants to stick with his girlfriend.

I fired his sorry butt. I looked at the moral issue in this case.

Matt

[Koss]

Custodial parent?

Parents say they have joint custody. Kid lives with each parent exactly the same amount of time each year. (right). Dad want to take HH status and dependent care exp. Mom want kid as dependent and child tax credit. Does this work? I think it does, but next year they want to switch roles. Do they need some attachments to return>?

What they are proposing would be totally consistent with the current law if Dad had the kid 183 days of the year.

Current rules supposedly say that the custodial parent is the one has the kid the greater part of the year. But I read an internal memo at my firm that said the IRS is changing its position to interpret the law to mean that the custodial parent is the one who has legal custody the greater part of the year, as opposed to looking at where the child was physically living. But even if this is correct, in cases where there is no court order, or where the court order fails to clearly establish which parent has legal custody, the IRS still falls back on who had the kid physically living with them for more than half the year.

Joint custody and "shared parenting" are concepts that are not adequately dealt with in the federal tax law. This problem is not going to go away. The only way to resolve this would be to completely eliminate the release of the dependent exemption to the noncustodial parent. Congress apparently considered doing just that as part of the UDC legislation, but it didn't make the final cut. And I suspect that this is part of the reason the final version of UDC contains internal inconsistencies. I don't think Congress ever intended to allow the Child Tax Credit to be claimed for a child that is not the taxpayer's dependent.

Form 8901 was created during an earlier version of the new rules, and then it wasn't deleted. The final text of the law appears to leave open the possibility that a young mother who is the dependent qualifying child of her mother can still somehow claim the Child Tax Credit for her baby. And this is simply ridiculous, given the fact that by definition she is not supporting herself or the baby. The form was not meant to be used this way. It may have originally been intended for some alternate version of the divorced/separated rules.

It is actually the text of the law on the Child Tax Credit that is defective. If you fix this so that the Child Tax Credit cannot be claimed by someone who is a dependent, and fix the EIC rules so that someone who is a dependent qualifying relative is prohibited from claiming EIC, the whole problem of nonstatutory families goes away, because the mother becomes ineligible for all benefits, and therefore does not have a qualfiying child.

Burton