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Child Support and Taxes FAQ

Navigating family law can be complex, especially when it comes to child support and taxes. The subject area of child support is a volatile one, but when you add tax implications, the combination becomes complex. A cornerstone of state child support guidelines is that the support is "income-driven," which means it is determined primarily by the income of the parties. Thus, it's vital that parents understand what funds can be considered income under the child support guidelines.

This FAQ-style article aims to address some frequently asked questions about the intersection of these two subjects. Whether you're dealing with a child support order, figuring out the effects of a court order on your bank account, or understanding the role of child support services, this article has you covered.

My ex-spouse is delinquent in paying child support. The attorney general has filed some sort of paperwork with the IRS to withhold my ex-spouse's tax refund. How would I receive the withheld refund?

The answer is different for each state. If your ex-spouse owes past due child support, the federal government can withhold their federal tax refund. This action is done in accordance with federal law. Once the Internal Revenue Service (IRS) takes the refund, it sends the money to the child support agency handling your child support case. 

The agency will then disburse the funds to you, either by direct deposit in your bank account or a check. If you've provided your bank account for direct deposit, expect the process to be quicker.

For any additional information, contact your caseworker or the child support agency. You also may need to contact the U.S. Department of Health and Human Services Administration for Children & Families Office of Child Support Enforcement for state-specific information.

When a person is married to someone who owes child support, is there any way to find out if I need to file an injured spouse claim before I file a return?

Yes. If you think your tax refund might be taken because of your spouse's child support obligation or other debts like alimony or spousal support, you can file a Form 8379, known as the Injured Spouse Claim. Before filing your return, check with the child support agency or a family law expert to see if your refund might be at risk.

Can I file my return electronically even though I am filing a form 8379, Injured Spouse Claim and Allocation?

Absolutely! The IRS allows electronic filing (e-filing) of your return even if you include the Form 8379. Just ensure you provide all necessary information and follow the guidelines. Remember, e-filing usually results in faster processing of your return and any refund you might be owed.

If two single people who have never married have a child and live together while providing equal support for that child, can they both claim head-of-household status?

In such a situation, only one person can claim the child as a dependent. This is typically based on the parent's income or other factors. The person who claims the child as a dependent may file as head of the household. The other parent cannot claim the head of household status based solely on that child.

My husband and I have provided a home for my sister and her son for the past seven months. She receives no child support from her ex-spouse, and she doesn't work or have any income of her own. Can I claim her and her son as dependents?

Your sister and her son need to qualify as dependents for you to claim them on your taxes. There are four tests that must be met for someone to be a qualifying relative:

  • Not a qualifying child test
  • Member of household or relationship test
  • Gross income test
  • Support test

If your sister's son is not the qualifying child of any other taxpayer, that would pass the "not qualifying child test." Under the member of household or relationship test, your sister and her son did not live with you all year, so they must qualify as relatives who don't live with you. A sister and a son or daughter of a sister qualify as relatives under this test.

Your sister appears to meet the gross income test because she does not have any income, which is under the threshold. If you provide more than half of your sister and her son's total support during the calendar year, they will pass the support test. In this situation, your sister and her son would likely qualify as qualifying relatives.

For more information, see IRS Publication 501, Dependents, Standard Deduction, and Filing Information.

If you pay child support, are you allowed to deduct anything from your taxes or claim the child as an exemption?

Child support payments are not deductible by the payor (the paying parent). Additionally, paying child support doesn't automatically allow you to claim the child as an exemption on your taxable income. The right to claim the child as a dependent usually goes to the custodial parent unless there's a specific agreement or court order stating otherwise.

However, the noncustodial parent may be treated as the parent who provided more than half of the child's support. Many agreements include a provision that when there is an even number of children, each parent declares half the children as dependents. For an odd number of children, the parents alternate years claiming the child.

In this situation, the IRS may require parents to sign Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, or a substantially similar statement.

Are child support payments considered taxable income?

No, child support payments aren't considered taxable income, according to the IRS. Child support payments are neither deductible by the payer nor taxable to the payee. So when you calculate your gross income to see if you are required to file a tax return, don't include child support payments received.

Is child support considered income when calculating the earned income credit?

No, for purposes of calculating the Earned Income Tax Credit (EITC), child support is not considered earned income. The EITC looks at earned income, and child support doesn't fit into that category.

I've recently changed my job. Do I need to inform the child support agency?

Yes. If you're the paying parent (obligor) and change your job, it's important to inform the child support agency. This ensures that the income withholding order can be sent to your new employer. Keeping the agency updated about any changes in employment or income can prevent potential issues or delays in child support payments.

My child now has health insurance through my new spouse. Does this change my support obligation?

It might. Medical support, which includes health insurance, is often part of child support orders. If your child has health insurance through another source, like a new spouse, it could potentially affect the amount of child support you owe. Always consult with a child support agency or family law attorney when there's a significant change in circumstances.

More Questions About Child Support and Taxes? An Attorney Can Provide Answers

Child support and taxes are each intimidating subject areas individually. Together, they can present challenging issues, and harsh penalties may apply if you fail to present your case properly. Don't go it alone.

Call an experienced child support attorney to help ensure that you make it through the process with as few complications as possible.

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