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Child lives with unmarried biological parents - who gets the EIC?


David

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Child and unmarried parents live in same house. The parents have been taking turns claiming the child as a dependent. 

I prepare the mother's tax return and it is her year to claim the child. She qualifies for the EITC based on her income. I thought if her AGI was lower than the other parent's AGI then she would not be able to claim the EITC. 

However, I ran across the following on the IRS website regarding unmarried parents:

Answer:

If they otherwise meet all of the requirements to claim the earned income tax credit (EITC), unmarried parents with a qualifying child may choose which parent will claim the credit.

  • If there are two qualifying children, each parent may claim the credit based on one child.
  • One parent may claim the credit based on both children.
  • If both parents claim the same qualifying child for the EITC, but don't file a joint return together, the IRS will apply tie-breaker rules and treat the child as the qualifying child of the parent with whom the child lives for the longer amount of time in the tax year. If the child lives with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who has the higher adjusted gross income (AGI) for the tax year.
  • If no parent can claim the child as a qualifying child, the child is treated as the qualifying child of the person who has the highest AGI for the tax year.
  • If a parent can claim the child as a qualifying child but neither parent claims the child, the child is treated as the qualifying child of the person who has the highest AGI, but only if that person's AGI is higher than the AGI of any of the child's parents who can claim the child as a qualifying child.

It appears that if one of the unmarried parent qualifies for the EITC then they can choose to have that parent claim the credit. It seems as though they can choose the parent with the lower AGI since the parent with the higher AIG may not qualify. This seems like cheating to me. 

Also, it appears that the IRS will only apply the highest AGI rule if both parents try to claim the EITC for the same child. It seems as though there is no problem for the parent with the lower AIG to claim the EITC as long as the other parent doesn't also try to claim it for the same child.

Am I understanding this correctly?

Thanks.

 

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They live together. That's a game-changer. 

Tie-breaker rules apply. Higher income wins. 

https://www.eitc.irs.gov/eitc-central/about-eitc/basic-qualifications/tie-breaker-rules/tie-breaker-rules

  • The parent with the highest adjusted gross income (AGI) if the child lived with each parent for the same amount of time during the tax years, and they do not file a joint return together;

My own niece is appalled that she can't claim her own son for EITC. 

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Thanks for your help trying to figure this out.

In the link you provided it appears that the higher income only comes into play if the parents can't agree. Following is an excerpt from the link:

If the person(s) can’t agree on who claims the child as a qualifying child, and more than one person claims tax benefits using the same child, the tiebreaker rule explained below applies.

So it still seems to me that the tax rule allows the unmarried parents, who both live with the child, to decide which one will claim the child as well as the other benefits, including the EITC.

Am I misreading this?

Thanks. 

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16 hours ago, David said:

Thanks for your help trying to figure this out.

In the link you provided it appears that the higher income only comes into play if the parents can't agree. Following is an excerpt from the link:

If the person(s) can’t agree on who claims the child as a qualifying child, and more than one person claims tax benefits using the same child, the tiebreaker rule explained below applies.

So it still seems to me that the tax rule allows the unmarried parents, who both live with the child, to decide which one will claim the child as well as the other benefits, including the EITC.

Am I misreading this?

Thanks. 

You are correct.  If the parents live together [and with the child, who does not provide over half his own support] and there is no dispute, either parent can claim the child and all the applicable tax benefits.  Obviously, the one claiming the child may or may not be HOH.  The benefits cannot be split.  

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On 6/20/2019 at 4:54 PM, David said:

So it still seems to me that the tax rule allows the unmarried parents, who both live with the child, to decide which one will claim the child as well as the other benefits, including the EITC.

Am I misreading this?

Thanks. 

I'm a bit confused.  The tie-breaking rules specify the parent with the highest AGI is allowed the EITC.  This does not state that the parents can pick and choose who gets to claim.

Where have I gone off the track??

For what it's worth, every year some clients ask me to calculate it both ways and take the highest EIC that calculates to the attached parent.  I tell them it must be awarded to the parent with the highest AGI.  If they can pick and choose, then I have been handling it wrong.

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  • 2 weeks later...

After reading the ever-increasing scope of Form 8867, replete with apparent ways to intercept and enforce the tie-breaker, it could be that the IRS simply chooses not to challenge the claim unless both parents claim.

I have found out (after going through certain channels) that Congress doesn't really care about smacking hands for EIC mistakes and fraud.  The congressman I knew said they viewed the EIC as a wealth transfer to the needy rather than a regulated calculated exercise for someone to be accountable for. 

Dealing with Form 8867 leaves no doubt that the IRS wants preparers to be the accountable party.  IRS doesn't want the accountability themselves, nor do they wish the taxpayer accountable either.

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  • 2 weeks later...

the law changed - first it went EIC to the highest earner - then it went to choice - unless per above...

Makes it easier and smarter... sometimes -

Depends if you see it as a scam or as a way to get more income into the household..

I have too many couples Not getting married due to tax refunds...

My goal is toget them to marry - assuming they stay together  ....

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