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    EIC Again

    Ex-husband client said ex-spouse has not worked during the year and she does not object to him claiming the two children. He says he supports them 50% and they live with him 50% of the time. He is going to claim the two but the issue of EIC has come up. Getting more nervous about this kind of situation. Any recommendations? Or suggestions

    #2
    EIC Rules

    One of the rules for EIC is that the child must have lived with you for more than half the year.

    If the children lived with your client 50% of the time, then the child fails the residency test for EIC.

    Dependency and child tax credit may be okay. The question is which parent is the custodial parent. If the child lived with each parent an equal number of nights during the year, then the parent with the higher AGI is the custodial parent...

    And of course, even if he is not the custodial parent, he can properly take the dependent exemption and child tax credit if his ex gives him Form 8332.

    There are probably some divorced couples who really do split their time with the children about half and half. But I think it's pretty rare.

    People say that because of concepts like "shared parenting," or "shared custody," that have evolved in domestic relations law.

    If the IRS challenges an EIC claim, the burden falls squarely on the taxpayer to show that the child lived with him for more than half the year.

    And many tax pros say that the IRS "does not honor a divorce decree." That's correct when it comes to releasing the exemption to the noncustodial parent. But that doesn't mean that the IRS will completely ignore the divorce decree. If it designates one parent as having "primary physical custody," or similar language, then the IRS may presume that the child lived with that parent for more than half the year, unless there is very strong evidence to the contrary. If the divorce decree does not identify a custodial parent, then I think the next piece of evidence they look at is school records. The IRS can presume that the child lived more than half the year at the child's address of record on file in the school records.

    The problem with your client is that he has already asserted that the child lived with him for half the year, which isn't enough for EIC. If he now changes his story, you've got an ethical issue. You may want to ask your client what kind of documentation he can produce to support his claim that the child lived with him.

    BMK
    Burton M. Koss
    koss@usakoss.net

    ____________________________________
    The map is not the territory...
    and the instruction book is not the process.

    Comment


      #3
      Says It Is 50%? No EIC?

      In a case like this then, no hope for the EIC? I prepared the return and he claimed the two children but didn't mention about the EIC because I thought it would be a problem. Does he suddenly come back and say, "Oh, it was probably 55%?"

      Comment


        #4
        Originally posted by zeros View Post
        In a case like this then, no hope for the EIC? I prepared the return and he claimed the two children but didn't mention about the EIC because I thought it would be a problem. Does he suddenly come back and say, "Oh, it was probably 55%?"
        you know the EIC questions you gotta answer for residency? Can he prove they lived with him more than six month? If he has docs that show that... then EIC.. no docs, not EIC.

        Chris

        Comment


          #5
          Residence?

          The only thing he can prove is that the son has membership in a park near his home. The son goes to school at his mother's home and also goes to the clinic at the mother's home. Father lives with his mother and she could vouch for the fact that the child is there often if thats any proof. I didn't mention that EIC idea and hope he doesn't bring it up.

          Comment


            #6
            Originally posted by zeros View Post
            I didn't mention that EIC idea and hope he doesn't bring it up.
            Why are you afraid to talk to your client about possible tax benefits?

            EIC is more than 50%.
            Custody goes by the number of nights spent with the parent.
            2013 had 365 days.

            Therefore, it is impossible for both parents to be 50/50 because 2013 had an odd number of days during the year.

            Therefore, your client either had the kid more than 50%, or less than 50%, not 50%.

            Inform the client of the rules and leave it up to him to decide whether he wants to take out a calendar and calculate the actual nights his kid spent with him.

            Comment


              #7
              Originally posted by zeros View Post
              Ex-husband client said ex-spouse has not worked during the year and she does not object to him claiming the two children. He says he supports them 50% and they live with him 50% of the time. He is going to claim the two but the issue of EIC has come up. Getting more nervous about this kind of situation. Any recommendations? Or suggestions
              If the children lived with him more than half the year then it would not matter what the ex-spouse said or thought. Just the fact that he brought it up would make me skeptical of his situation. In reality in situations as in your post, I would venture a guess that the vast majority of the time the kids live with mom more than dad. Just seems to be the way things are. Also, fair or not, from my experience it seems that the IRS is much more inclined to question fathers that claim the children and EIC, etc. more than the moms.

              I just love it when a client says the children live with each 50-50. Drives me crazy.

              Comment


                #8
                Or An Unmarried Couple

                Last year had an unmarried couple with 2 kids come in. They had always each claimed one child and both had claimed EIC in the past. I explained that the parent with the higher income was the only one eligible to claim both kids for EIC. Both ended up with refunds, but the mother was visibly upset, as she had the lower income. Haven't seen them yet this year, and they weren't mailed a reminder card either.

                Comment


                  #9
                  Originally posted by Justataxguy View Post
                  Last year had an unmarried couple with 2 kids come in. They had always each claimed one child and both had claimed EIC in the past. I explained that the parent with the higher income was the only one eligible to claim both kids for EIC. Both ended up with refunds, but the mother was visibly upset, as she had the lower income. Haven't seen them yet this year, and they weren't mailed a reminder card either.
                  I believe your thinking is incorrect (but EIC rules can be see confusing, maybe I am wrong). This couple can agree to each take one child on their returns. The AGI only comes into play as a tiebreaker rule if they both claim the same child for EIC. See TTB 3-18 Single Parent situations.

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