Earned Income Credit

[10409000]

Hello All. So I got letter for EIC compliance to make sure that im doing them accurately so im being very cautious on all my eic returns. I have one today that i really didnt know which was the accurate way to file. So taxpayer 1 mother of 1 child she makes roughly 47,000 annually she supports and lives with her daughter. She also lives with taxpayer 2 which is her boyfriend and biological father of their child. He makes about $20,000 annually. Is it ok to put the child under the father since he would get the most back for EIC? or is that the wrong way to file for them? Im confused as to when to apply the tiebreaker rules if they mutually agree to let the parent claim the child to get the most back. 

[TaxGuyBill · Accepted solution]

Tiebreaker rules only apply if more than one person actually claims the child.  If they agree for who claims the child, the Tiebreaker rules don't apply.

So if they agree, they can choose who claims the child.  It sounds like the father is the best option in this scenario.

However, because the mother makes more income, it sounds like she may be able to claim Head of Household if she claims the child.  But if the father claims the child, the mother would not be able to claim Head of Household.

[rbynaker]

TheTaxBook (and I'm sure QuickFinder too) has an excellent chart with lots of different scenarios.  If you don't already have one, it's the best tax season investment you can make (it makes more headaches go away than a Costco sized bottle of aspirin.)

IMO you have to attack these from two directions.  1) What's the right (legal) tax result.  2) What do you need to document for Due Diligence.  Sometimes there's even overlap between the two.  In complicated situations, I would walk through each step and document what questions you asked, what the responses were, and the conclusion as to whether the test was satisfied.

[BobKamman]

My guess is that the TaxBook just took the examples from Pub 596, because when have tax book publishers ever gone out of their way to come up with original material?  This whole tiebreaker issue requires some deep digging for those who don't regularly come across these conflicts (or agreements).  I would, however, consider it due diligence if the facts matched those in this Pub 596 example:

Example 10—Unmarried parents. 

You, your 5-year-old child, L, and L’s other parent lived together all year. You and L’s other parent aren't married. L is a qualifying child of both you and L’s other parent because L meets the relationship, age, residency, and joint return tests for both you and L’s other parent. Your earned income and AGI are $12,000, and L’s other parent’s earned income and AGI are $14,000. Neither of you had any other income. L’s other parent agrees to let you treat the child as a qualifying child. This means if L’s other parent doesn't claim L as a qualifying child for the EIC or any of the other tax benefits listed earlier, you can claim L as a qualifying child for the EIC and any of the other tax benefits listed earlier for which you qualify.

[rbynaker]

But TTB puts the examples into a nice chart. 🙂

[BobKamman]

@rbynaker   That reminds me of the coloring book they made based on domestic violence. 

https://www.themarysue.com/colleen-hoover-draws-criticism-for-coloring-book-based-on-her-domestic-ab...