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Head of Household

Started by mistoffolees, Mar 21, 2007, 04:31:50 AM

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mistoffolees

I'm getting close to a divorce settlement (FINALLY!). It would help if my stbx didn't walk out of mediation every time she doesn't get her way and we have to reschedule another session 3 weeks later after her attorney can talk her into coming back to the table.

Anyway, I'm looking at tax issues for this year. Since I was the family's sole source of income for most of our marriage, I'm obviously going to take a huge hit in going from married filing jointly to single. Nothing I can do about that.

The agreement we've worked out so far doesn't discuss my daughter's personal exemption. While I'm fairly high income and that exemption starts to phase out, it's still got some value to me. Our agreement says that she lives with each of us 50% of the time, but I'm still paying support, so I can easily win the 'who provides greater than 50% of the income' test. Since she's at each home 50% of the time, there's a tie-breaker - who has the higher AGI - and I win that, so I should be able to get the deduction. I'm going to try to get it into the agreement, but if I can't, I'm pretty comfortable taking it based on the tie breaker rule.

The problem is Head of Household. As someone corrected me a week or so ago, HofH requires that the child live with you MORE THAN 50% of the time. My dauughter is with each of us 50%. Is there a similar tie breaker rule for HofH? If not, I'm gong to have to try to get the agreement to say that Katie gets one day a year more with me than with her mother, but that will be a huge battle. The value to me (difference between filing singly and head of household) is about $3,000 per year.

Any thoughts on getting the Head of Household status if the child is exactly 50% in each home?

gemini3

This is from the IRS website:

"Children of divorced or separated parents.   In most cases, because of the residency test, a child of divorced or separated parents is the qualifying child of the custodial parent. However, the child will be treated as the qualifying child of the noncustodial parent if all four of the following statements are true.
The parents:

* Are divorced or legally separated under a decree of divorce or separate maintenance,

* Are separated under a written separation agreement, or

* Lived apart at all times during the last 6 months of the year.

* The child received over half of his or her support for the year from the parents.

* The child is in the custody of one or both parents for more than half of the year.

Either of the following statements is true.

The custodial parent signs a written declaration, discussed later, that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches this written declaration to his or her return. (If the decree or agreement went into effect after 1984, see Divorce decree or separation agreement made after 1984, later.)

A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2006 states that the noncustodial parent can claim the child as a dependent, the decree or agreement was not changed after 1984 to say the noncustodial parent cannot claim the child as a dependent, and the noncustodial parent provides at least $600 for the child's support during the year."

It looks like, according to this, you can claim you daughter because (from your post), you meet all of the rules.  The kicker is that you have to attach the declaration - which is just the form 8332.  You can download it from the IRS website.  I don't know how much of an issue you'll have getting her to sign it.

notnew

They aren't divorced yet. So, there is no binding agreement. I don't know if they have a separation agreement or not.

BTW - Gemini3 - Double check your post - you listed five statements that should be true and not four as your post indicated.

The IRS is confusing enough!

The fact is mist that whoever files first gets to make the claim. If you have nothing binding, you can file and claim the child. You can try the head of household, but it may not hold water if challenged.

After you have an agreement in place, then the form 8332 comes into play. I would think it would be fair to switch off from year to year. I don't get to take the deduction for my child at all and BM would never agree to allow me to. So, it is best to get these issues addressed in your agreements ahead of time.

Tax time is quickly approaching. If she fails to finish a mediation session where this can be discussed, then it could reasonably be expected that you would file your taxes taking whatever deductions you could.

And, how do you know she hasn't filed already taking the deduction?

I'd ask the attorney too. It's a dirty game and the final decision is ultimately up to you.

gemini3

You're right, we don't know if they have a seperation agreement.  I copied the information directly from the site - which can be found here if you want to read it yourself:

http://www.irs.gov/faqs/faq-kw80.html

 - on this page you can scroll down to questions three and four.  If you click the link they provide, it takes you here:

http://www.irs.gov/faqs/faq-kw80.html

Scroll down to "exemptions for dependants" and click "qualifying child".  It will take you to the page I copied the information from.

mistoffolees

It's not quite that simple. Your post describes how I would go about claiming the Head of Household deduction IF I WERE THE NONCUSTODIAL PARENT. Since I'm 50:50 joint custody, that doesn't apply. Further, using the tie breaker, I'm going to claim the deduction for my daughter, but even if I don't, it doesn't help.

This only helps when the noncustodial parent wants to claim the deduction. I guess one option is that I let her have the deduction and I then become noncustodial for tax purposes and take the Head of Household, but I'm not sure I can get her to agree to that.

mistoffolees

Please read my original post. The deduction is not the issue. I already know how that will play out.

The issue is Head of Household filing status - which has different rules.

And, yes, we will have a divorce decree in place before the end of the year (I don't think even she will get away with stalling that long).

mistoffolees

None of that helps. HofH requires the child to live with you MORE THAN HALF the year. That's the issue.

gemini3

The way that I am reading it is that claiming Head of Household has nothing to do with whether or not you are the custodial or noncustodial parent.  Either can claim head of household as long as they meet the criteria they listed.

It specifically says what to do when a child could be treated as the qualifying child of either parent, such as "two of the persons are parents of the child, they do not file a joint return together, and the child lived with each parent the same amount of time during the year" - which is your circumstance. right?  

In that case, it states (in table six under "Special Test for Qualifying Child of More Than One Person") that the "parent with the higher adjusted gross income (AGI)." will be able to claim.  

If you don't feel comfortable with that explaination, you could consult a tax professional for further explaination of "tie breakers" in regards to head-of-household status.  

jcsct5

The IRS uses the number of overnights spent in your home to determine how much the child lives with you. You should keep a calendar and mark all the nights the childs sleeps at your home and keep this as a record in case you ever get audited. Often time even with 50/50 plans, due to vacations etc. the child ends up spending more overnights at one of the parents homes.

While the courts can't order that you get to file head of household, some of them do take into consideration your filing status when determining child support. Like in California they take into consideration the tax status of both parents, if you file HOH then you have more money available for the child thus more child support is paid to the other parent. If you live in one of the states that do this then you might want to look into the effects it has on your support. For instance if your ex has a job that doesn't pay much and she claims the child as HOH then she may qualify for EIC which would give her more money to spend on the child and reduce your support obligation.

Anyway my husband has 50/50 and his order allows for the children to spend any extra days nessesary to be at the parents house that is claiming them that year one day more than the other parents house. However they very rarely have used it because the kids spend more overnights at our home than hers due to vacations and holidays and she has never requested the extra days. He insisted on this because he works for the IRS and if he were to claim the child he wasn't "allowed" to claim according to the IRS rules then he would lose his job.  

My opinion however is that a provision like this is vurtually impossible to enforce unless it is specifically spelled out how and when the extra time required to meet the threshold would take place. Since you often won't know how many nights the child actually spent in your home and how many more you need to meet that threshold until the end of the year when all the holiday time is taking place. I hardly think the courts would agree that the childs shouldn't spend christmas with one parent because the other parent needs a few extra days to qualify to claim them for taxes.

Also I am assuming (I think you said this) that you are trying to get this sorted out for the current tax year of 2007. If you are still married I'm pretty sure you can't claim HOH for 2006 tax year.

Good luck.

mistoffolees

>The IRS uses the number of overnights spent in your home to
>determine how much the child lives with you. You should keep a
>calendar and mark all the nights the childs sleeps at your
>home and keep this as a record in case you ever get audited.
>Often time even with 50/50 plans, due to vacations etc. the
>child ends up spending more overnights at one of the parents
>homes.
>
>While the courts can't order that you get to file head of
>household, some of them do take into consideration your filing
>status when determining child support. Like in California they
>take into consideration the tax status of both parents, if you
>file HOH then you have more money available for the child thus
>more child support is paid to the other parent. If you live in
>one of the states that do this then you might want to look
>into the effects it has on your support. For instance if your
>ex has a job that doesn't pay much and she claims the child as
>HOH then she may qualify for EIC which would give her more
>money to spend on the child and reduce your support
>obligation.
>
>Anyway my husband has 50/50 and his order allows for the
>children to spend any extra days nessesary to be at the
>parents house that is claiming them that year one day more
>than the other parents house. However they very rarely have
>used it because the kids spend more overnights at our home
>than hers due to vacations and holidays and she has never
>requested the extra days. He insisted on this because he works
>for the IRS and if he were to claim the child he wasn't
>"allowed" to claim according to the IRS rules then he would
>lose his job.  

The best I've been able to come up with is that we have exactly 50:50, but alternate years we each get one extra day. That way, I could get HofH at least every other year. She wouldn't be able to get it in the off years because she doesn't supply half the support. She would never agree to my getting an extra day every year, so I'm likely to have to alternate between HofH and single - and that's even if she'll agree to let us alternate one extra day each year. She might refuse just to be a pain.

If there are any other solutions, I'd be happy to hear them.

>
>My opinion however is that a provision like this is vurtually
>impossible to enforce unless it is specifically spelled out
>how and when the extra time required to meet the threshold
>would take place. Since you often won't know how many nights
>the child actually spent in your home and how many more you
>need to meet that threshold until the end of the year when all
>the holiday time is taking place. I hardly think the courts
>would agree that the childs shouldn't spend christmas with one
>parent because the other parent needs a few extra days to
>qualify to claim them for taxes.
>
>Also I am assuming (I think you said this) that you are trying
>to get this sorted out for the current tax year of 2007. If
>you are still married I'm pretty sure you can't claim HOH for
>2006 tax year.

Right. I'm planning for 2007.