The ability to claim your children as your dependents is one of the most significant tax breaks that parents have, especially once you factor in things like the Earned Income Tax Credit (EITC). However, that seemingly straightforward process can become complicated once you're divorced.
Here are some important facts to remember about claiming your children as your dependents after divorce:
1. Your divorce agreement may already stipulate the terms.
When you were in the midst of your divorce, there were a lot of different things you had to decide. Therefore, it's easy to overlook a clause or two, especially if it didn't pertain to anything pressing. Now that tax time is here, however, you need to get your divorce papers out and determine if the issue of taxes was addressed.
If it was, make sure that you follow the agreement. Claiming the EITC when you aren't allowed -- along with other deductions and credits for your children -- can result in some hefty fines.
2. If you're the non-custodial parent, you'll need your ex-spouse's help.
If you don't have primary physical custody of your children, you can still claim them as your dependents for tax purposes -- as long as your ex-spouse completes Internal Revenue Service (IRS) Form 8332, the Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent. (This is also the form your ex-spouse can use to relinquish your right to claim your child on your taxes.)
3. The IRS can't stop either parent from filing.
If your agreement isn't clear or there's some other reason you and your spouse can't agree on who claims the kids, don't expect the IRS to make the decision. Whoever files their tax return first will get the deduction. If the dispute continues, one or both parents may have to amend their tax returns.
Issues like these are one of the reasons it pays to have an experienced attorney on your side as you work out your custody agreement.