gooddad2011:I have had a former IRS employee and current national company rep prepare my taxes and he has not had a problem following my ordered arrangement. I know many other non custodial parents who either claim one child every other year or do it the same as me with no issues or audits. So, for someone to say this is not possible, I know this is untrue.
I'm sorry, but I'm a lawyer and I've been in tax practice in some capacity for over 20 years, including with the IRS. I know the tax law, better than many "tax preparers." Many of the those who work for some of the big national companies get only a few months of training before they start preparing returns for customers and don't handle tax matters all year around. They know only the basics and even get some of the basics wrong. They rely a great deal on the tax software the firm provides them to do their work, and that's a problem because tax software, as good as it is, is no substitute for really knowing the tax law. That's why I'm not a big fan of those big national tax prep firms. I've had to fix many problems they've gotten wrong for their customers over the years.
As for audits, the IRS computer cannot catch all these errors because all the information needed to do that is not on the return, and the IRS only selects a small portion of the returns for a real live audit with an examiner. So the fact that you and a few others you know have never been audited is not a confirmation that you got things right on your returns.
IRC § 21(e)(5) makes it very clear when it specifically says the child "shall not be treated as a quallifying individual with respect to the noncustodial parent."
The applicable tax regulation explains it a bit better. Treas. Reg. § 1.21-1(b)(5)(ii) says:
"Custodial parent allowed the credit. A child to whom this paragraph (b)(5) applies is the qualifying individual of only one parent in any taxable year and is the qualifying child of the custodial parent even if the noncustodial parent may claim the dependency exemption for that child for that taxable year. See section 21(e)(5). The custodial parent is the parent having custody for the greater portion of the calendar year. See section 152(e)(4)(A)."
The IRC and the tax regulations are the tax law. You can't get a more official answer on the issue than that. But I know they are written in tax legalese and are not always very easy for the typical taxpayer to understand. That's why, for better or worse, there are tax lawyers.
The IRS explains it in more plain language on its forms and web site. The IRS instructions for Form 2441 (which is the form for the child and dependent care credit) says: "The noncustodial parent cannot treat the child as a qualifying person even if that parent is entitled to claim the child as a dependent under the special rules for a child of divorced or separated parents."
IRS Tax Topic 602 on the child and dependent care credit says the same thing: "A noncustodial parent may not treat a child as a qualifying individual for purposes of the credit, even if the noncustodial parent may claim an exemption for the child."
So, if you still don't believe that I have it right and your preparers have gotten it wrong, I suggest you ask the preparer to look at IRC § 21(e)(5), Treas. Reg. § 1.21-1(b)(5), the Form 2441 instructions, and Tax Topic 602 and ask if he/she still believes you are eligible for the credit. Or have him ask one of the firm's tax law experts to look at those materials. If the tax prep firm says the noncustodial parent may claim the child and dependent care credit after reading those materials, ask the preparer to cite you the specific law that supports his/her position. I'd love to hear the answer. If he/she can't cite you the law, then that's a red flag to you that the preparer doesn't know the law and apparently doesn't care if he or she gets it right.
gooddad2011: I thought this would be a simple question, but it seems to require complex answers from some.
I'm sorry you thought my answers were "complex." The basic answer is simple: only the custodial parent may claim the dependent care credit; the noncustodial parent cannot claim it even if the noncustodial parent can claim the dependent exemption for the child. And Drew is right, the custodial parent gets the credit only for what he or she actually spent. What this means is that no one gets a tax credit for the care expenses the noncustodial parent pays for. Yes, I know it sucks. But that's the rule that Congress wrote.
While the basic answer is simple, I've tried in my answers to not only provide you the basic answer like I did in the last paragraph, but also to explain where in the law I found it. The reason for that is that you never want to rely on what some anonymous person on the internet tells you about the law without looking at the actual law or a trusted source (like the IRS website) to verify that the person knows what he or she is talking about. There are just too many sites out there with bad information. So, my answer here is a bit long. But you have the sources I relied upon up above and can use them to verify what the law is and to verify whether your tax preparer knows his/her stuff. You did the right thing in asking the question. I hope that what I've given you here will help you understand the law on this a bit better.
