When you claim a qualifying child as a dependent on your tax return, you might either collect a refund from the IRS or use any credits issued to reduce your tax liabilities. A qualifying child is one that's under the age of 19 (or 24 if attending school full-time). They must have also lived with you and received more than half of their support from you during the tax filing year.
There are many advantages to claiming a child as a dependent on taxes but also many risks when done incorrectly. If you’re married, recently divorced, or separated from your spouse or partner, either you or your spouse can claim your child as a dependent. Here’s what could happen if you both claim your child on taxes and the IRS finds out.
The IRS penalizes tax filers who each claim their child as a dependent on their tax return.
As tempted as you and your child’s other parent both might be to claim your child as a dependent on your tax return, you’ll want to avoid doing this. The only time two parents can both claim their child on their tax return is when they file using the status “married filing jointly.” In this case, you both are essentially claiming your child, but on one tax return.
If you don’t plan on using this filing status, then only one of you gets to claim your child as a dependent. When both parents claim their child on their taxes, they put themselves at risk of being audited by the IRS. The IRS database is extremely intelligent and designed to identify flaws in tax returns.
If the IRS detects the same child has been claimed on two different tax returns, the following could happen.
1. You’ll be audited and potentially face penalties and interest.
If the IRS audits you, you must show that you hold the right to claim your child as a dependent and not your child’s other parent. This can help you avoid penalties and interest. If you can't prove this, your taxable income will likely increase for the filing year being audited.
You might have to pay back taxes you otherwise would have owed. Also, the IRS might issue a penalty and it will add interest. If you collect credits like the dependent care credit or the EITC (Earned Income Tax Credit) you weren’t entitled to, you’ll have to pay the money back.
2. The IRS might accuse you of tax evasion.
Once you file your tax return, the IRS has three years to conduct an audit on you, according to TurboTax. If the IRS fails to conduct an audit within this window but recognizes the inconsistency later, the agency might still have grounds to start an investigation. TurboTax says that the IRS could “argue that it has an unlimited amount of time to examine your return since you made a willful attempt to evade income tax.”
This usually happens if you fail to provide proof that shows you're qualified to claim your child on taxes.
3. Your tax refund could be delayed.
The IRS is working more diligently to identify errors in tax returns. If your return is flagged because your child was listed as a dependent on two returns, the agency might reject it rather than accept it. In this case, you would need to correct the error, which could reduce your refund amount and ultimately delay it from being deposited into your bank account.
What if parents are separated or divorced? Who gets to claim the child on taxes?
If you're divorced or separated, only one parent can claim the child on their tax return. If the child is living with both you and their other parent and you each are equally responsible for supporting him/her, then it would be best to take turns claiming the child as a dependent. If you claimed your child as a dependent on your 2020 return, then your child’s other parent could claim them on their 2021 return.
Now, if you’re a non-custodial parent, which means you don’t have physical custody of your child but you do have visitation rights, you generally can't claim your child on taxes. However, if you wanted to list your child as a dependent and the child’s custodial parent agreed to let you, then you can as long as you obtain a signed IRS Form 8332 or a similar document.