Unmarried couple with two children want to claim one child each for EIC and CTC

[manyhappyreturns]

Couple came in with their 2 children wanting to file 2 separate tax returns with claiming one child each for EIC and CTC. The tiebreaker rules seem vague to me regarding this situation. Both TPs are biological parents of the children and all 4 lived together all year, which leaves the AGI test as the only tiebreaker rule that applies. The rule says the TP with the higher AGI is entitled to claim the child, but doesn't specifically say that the parent with the lower AGI cannot claim the child if the other parent agrees. So, because I didn't feel particularly good about letting them each claim a child, which would make a difference of $4,000 in EIC, I told them that the father needed to file HOH and claim both kids and mom needed to file single. So they left, which is okay with me, since I am plenty busy preparing non-risky tax returns. Before they left, they said they had gone to another preparer in town for an estimate who told them they could each claim one of the children, although only one could file HOH. It

If anyone here can shed light on this situation, let me know. It doesn't seem right to me that a couple can net thousands more dollars in refunds by staying unmarried and claiming that the father supported himself and one of the children while the mother supported herself and the other child while living in the same house together. I checked to see what their refund would be if they were MFJ, and it came out to just over $5,000, which is quite a bit less than either of them would receive by staying single and claiming one or both children.

[Kram BergGold]

Tie Breaker Rules

Tie Breaker Rules only apply if there is disagreement between the 2 parties. In your case they agree that each will claim one child so they are fine. I agree only one can be H of H. CTC goes with the dependency exemption. As for EIC, I would have to look it up but I think once you see that the tie breaker rules don't apply, then you know the answer, so I won't waste my time.

[manyhappyreturns]

Yeah, the research I've done doesn't really say anywhere that they can't do that, so you are probably right. It's unfortunate that the tax system is set up in a way that discourages couples with children from getting married. That's pretty lame, actually, but it is what it is.

[mactoolsix]

We have a client (actually 2) G'mother, Daughter live together with 3 (grand)children. Both work. Each year we compare the HoH and who claims how many to achieve the best tax for the pair. Nothing a fowl of the IRS rules, just good tax avoidance.

[taxea]

would be nice to see a letter ruling on this issue.

[FEDUKE404]

In the meantime. . .

Yeah, the research I've done doesn't really say anywhere that they can't do that, so you are probably right. It's unfortunate that the tax system is set up in a way that discourages couples with children from getting married. That's pretty lame, actually, but it is what it is.

Have fun with those Forms 8867 !!

FE

[BP.]

the research I've done doesn't really say anywhere that they can't do that

Research here and you'll find exact language about your specific scenario. Each can claim a child.

https://www.eitc.irs.gov/Tax-Preparer-Toolkit/faqs/tiebreakers