Child Tax Credit

[sandytax]

I am confused about the changes to the Child Tax Credit. I understand that now the custodian parent can keep the child tax credit for themselves. What I am trying to figure out is how to tell if the custodian parent is going to keep the child tax credit for themselves. Most of my noncustodian parents do bring in Form 8332 signed by the custodian parent and we do have some that are marked for multiple years. Will the divorce and support (if stated within) decrees be sufficient documentation for the noncustodian parent to take the child tax credit? Should we attach Form 8901 with the 8332 when we send out the new ones for this year? I have a feeling that alot of people will not know about this law change and if we send out the 8901 with the 8332 it could cause additional fiction with the people involved. I really don't know how to approach this new situation and I don't want my clients to be involved in audits, if I can find a easy way to handle this.

Thank you for you help.
Sandy

[Armando Beaujolais]

Check out the updates at the link above. Then "Legislative Updates," toward the bottom. The new act that got signed last week took out that new provision allowing the noncustodial parent the dependent exemption with a divorce decree. It's back to the old rules and Form 8332.

[Bees Knees]

The general rule is the child tax credit goes to the person who can claim the child as a dependent. In a divorce, if you sign over the dependency exemption to the noncustodial spouse, the noncustodial spouse is also going to get the child tax credit.

The only two exceptions to this are if you can’t claim the child as a dependent because you yourself are claimed by someone else as a dependent. Or, you can’t claim the child as a dependent only because the child filed a joint return with a spouse. In these two cases, you still get the child tax credit even though you do not get the dependency exemption.

What you can’t do is keep the child tax credit for yourself if you are the custodial parent and you signed over the dependency exemption to the noncustodial spouse.

Also, under the new rules, the divorce decree is no longer applicable. The dependency exemption can only go to the noncustodial spouse if the custodial spouse signs Form 8332. It no longer matters what the divorce decree says.

[Gene V]

Child Tax Credit

What you can’t do is keep the child tax credit for yourself if you are the custodial parent and you signed over the dependency exemption to the noncustodial spouse

I believe by signing form 8901 you can get the child tax credit even if you sign over the dependency exemption to the noncustodial spouse.

Is this correct?

[Bees Knees]

I believe by signing form 8901 you can get the child tax credit even if you sign over the dependency exemption to the noncustodial spouse.

Is this correct?

I don't see any place to sign form 8901. And according to its instructions, it is only used for the two reasons I mentioned. The instructions say:

"Who Must File
Use Form 8901 if your qualifying child is not your dependent
because either of the following applies.
● You, or your spouse if filing jointly, can be claimed as a
dependent on someone else’s 2005 return.
● Your qualifying child is married and files a joint return for
2005 (unless that joint return is filed only as a claim for a
refund and no tax liability would exist for either spouse if
they had filed separate returns)."

No mention of using it because you signed over the exemption to a noncustodial parent.

[Gene V]

Form 8901

Thanks Bees Knees, I was still looking at the draft form as of 9/16/2005- I see the new form is out with instructions, makes sense now.

Gene