Broken divorce decree?

[momodylan]

What is the name of your state (only U.S. law)?
Texas

I've been doing my mother-in-laws taxes ever since her divorce was finalized. My question is; her divorce decree states that each parent claims two of their children on their taxes (they have four total), but when I was filing her Earned Income Tax Credit, the IRS website states that the non-custodial parent is NOT eligible to claim any of the children, regardless of what the decree states. All four of the children are with her, at least 95% of the year. Her ex-husband is now demanding last years tax money for two of the girls and is threatening to go to the lawyers, stating that he can now do what he wants because she broke the decree. Obviously I went with what the IRS stated because I wanted to make sure I wasn't unknowingly committing tax fraud, but now I'm afraid that I may have caused her legal problems with her ex. He is also demanding to know who did her taxes so he can contact them. Is this something he has a right to do? Can anybody offer me some educated advice or tell me if I was right or wrong in what I did? Thanks in advance for any helpful advice I can get!

 

[Antigone*]

What is the name of your state (only U.S. law)?
Texas

I've been doing my mother-in-laws taxes ever since her divorce was finalized. My question is; her divorce decree states that each parent claims two of their children on their taxes (they have four total), but when I was filing her Earned Income Tax Credit, the IRS website states that the non-custodial parent is NOT eligible to claim any of the children, regardless of what the decree states. All four of the children are with her, at least 95% of the year. Her ex-husband is now demanding last years tax money for two of the girls and is threatening to go to the lawyers, stating that he can now do what he wants because she broke the decree. Obviously I went with what the IRS stated because I wanted to make sure I wasn't unknowingly committing tax fraud, but now I'm afraid that I may have caused her legal problems with her ex. He is also demanding to know who did her taxes so he can contact them. Is this something he has a right to do? Can anybody offer me some educated advice or tell me if I was right or wrong in what I did? Thanks in advance for any helpful advice I can get!

Are you licensed tax preparer?

 

[Proserpina]

What is the name of your state (only U.S. law)?
Texas

I've been doing my mother-in-laws taxes ever since her divorce was finalized. My question is; her divorce decree states that each parent claims two of their children on their taxes (they have four total), but when I was filing her Earned Income Tax Credit, the IRS website states that the non-custodial parent is NOT eligible to claim any of the children, regardless of what the decree states. All four of the children are with her, at least 95% of the year. Her ex-husband is now demanding last years tax money for two of the girls and is threatening to go to the lawyers, stating that he can now do what he wants because she broke the decree. Obviously I went with what the IRS stated because I wanted to make sure I wasn't unknowingly committing tax fraud, but now I'm afraid that I may have caused her legal problems with her ex. He is also demanding to know who did her taxes so he can contact them. Is this something he has a right to do? Can anybody offer me some educated advice or tell me if I was right or wrong in what I did? Thanks in advance for any helpful advice I can get!

Yes, you may have caused a big problem for Mom.

Are you actually a tax professional?

 

[momodylan]

No. We are military and always prepare our taxes using the HR Block or similar software. My mother-in-law doesn't speak English very well and is very unorganized financially, so she asked me if I would be willing to do her taxes for her. My aunt has been a CPA for close to two decades, so whenever I had a question I would run it by her if I couldn't find it on the IRS website. The thing is, the IRS states that it doesn't matter what the decree states, that the non-custodial parent is not eligible for the earned income credit.

 

[Silverplum]

No. We are military and always prepare our taxes using the HR Block or similar software. My mother-in-law doesn't speak English very well and is very unorganized financially, so she asked me if I would be willing to do her taxes for her. My aunt has been a CPA for close to two decades, so whenever I had a question I would run it by her if I couldn't find it on the IRS website. The thing is, the IRS states that it doesn't matter what the decree states, that the non-custodial parent is not eligible for the earned income credit.

The court that issued the divorce decree CAN override the IRS rules.

Mom owes the money to Dad.

 

[Proserpina]

(Does Dad have any recourse against OP? I'm just curious)

 

[Antigone*]

(Does Dad have any recourse against OP? I'm just curious)

I'm not sure about that one. I was waiting for either Ld or dave to pop in and fill us in. I know there is insurance available for omissions and errors but I think the burden falls on the taxpayer unless the preparer knowlingly falsifies the information.

Let's see what our resident tax pros say.


eta... I forgot about Tink

 

[TinkerBelleLuvr]

The court that issued the divorce decree CAN override the IRS rules.

Mom owes the money to Dad.

EIC can ONLY go to the custodial parent. No court can override IRS law on this matter. THe NCP CAN take, as dependents the two children.

CP get the Child and Dependent care credit and EIC.

The father can scream all he wants, but he cannot LEGALLY take EIC.

 

[Silverplum]

EIC can ONLY go to the custodial parent. No court can override IRS law on this matter. THe NCP CAN take, as dependents the two children.

CP get the Child and Dependent care credit and EIC.

The father can scream all he wants, but he cannot LEGALLY take EIC.

If I had feelings (which I obviously do not have), I might think you were YELLING.

But then it turned out to be a lot of acronyms and a few emphases.

 

[Carlos Ray]

No. We are military and always prepare our taxes using the HR Block or similar software. My mother-in-law doesn't speak English very well and is very unorganized financially, so she asked me if I would be willing to do her taxes for her. My aunt has been a CPA for close to two decades, so whenever I had a question I would run it by her if I couldn't find it on the IRS website. The thing is, the IRS states that it doesn't matter what the decree states, that the non-custodial parent is not eligible for the earned income credit.

If you are military you have access to free legal advice at any military base JAG or SJA office. I advise you to contact them as soon as possible.

 

[momodylan]

Thank you to everybody who is chiming in.

TinkerBelleLuvr~ Do you mind if I ask you what your background is on this? For clarification, SHE (CP) is the only one entitled to EIC, but HE (NCP) can still claim two of them? When we filed, she claimed two of the children and he claimed the other two. So I didn't do anything wrong there. Phew! As far as EIC goes, we claimed three, which was the maximum allowed. Sooo, I haven't done anything wrong? Does he have a right to know who did her taxes and to contact them? He is EXTREMELY difficult to deal with in most regards, so if I can avoid it, I'd rather not have to talk to him.

So, did we break the decree???

 

[LdiJ]

Thank you to everybody who is chiming in.

TinkerBelleLuvr~ Do you mind if I ask you what your background is on this? For clarification, SHE (CP) is the only one entitled to EIC, but HE (NCP) can still claim two of them? When we filed, she claimed two of the children and he claimed the other two. So I didn't do anything wrong there. Phew! As far as EIC goes, we claimed three, which was the maximum allowed. Sooo, I haven't done anything wrong? Does he have a right to know who did her taxes and to contact them? He is EXTREMELY difficult to deal with in most regards, so if I can avoid it, I'd rather not have to talk to him.

So, did we break the decree???

Tinker is a tax professional and so am I. Please ignore some of the other advice you received.

Here is the problem. If you used the two children that the father was allowed to claim for ONLY EIC (and possibly daycare) purposes on her return, then there is no problem. She cannot get in trouble with the courts.

HOWEVER, if you also used the two children for the dependency exemption and the child tax credit, then you DID mess your mother in law up.

I suggest that you go with your mother in law to a tax professional to amend the prior years taxes (and tell her ex that he can amend his to claim the children's dependency exemption and child tax credit) and don't make the same mistake this year. If you cannot figure out how to make the software only claim the children for EIC and daycare purposes then take your mother in law to a professional for this year's taxes as well.

 

[LdiJ]

If I had feelings (which I obviously do not have), I might think you were YELLING.

But then it turned out to be a lot of acronyms and a few emphases.

The state court can never override federal tax law. The only reason why the state court can order that an ncp can get the tax exemptions and child tax credit for the children is because the federal tax code ALLOWS the custodial parent to release the children's exemptions and child tax credit to the ncp, via form 8332.

However the state court CANNOT order that the ncp be allowed to claim earned income credit or daycare credits. That has been explained on these forums often enough that you should get that by now.

 

[punchcard]

Her divorce decree states that each parent claims two of their children on their taxes (they have four total)

What is the exact wording of the decree? Did it specifically address the four child tax issues: (1) dependency exemption, (2) child tax credit, (3) earned income credit, and (4) daycare credits, or did it vaguely say something about the kids and taxes and dad and mom just assumed it meant each of them could pursue all four before the IRS for each of two kids?

The IRS website states that the non-custodial parent is NOT eligible to claim any of the children, regardless of what the decree states.

Do you have a link? From the IRS website, I'm seeing "the child will be treated as the qualifying child of the noncustodial parent if all four of the following statements are true." I'm also seeing, "You may still be able to claim the Earned Income Credit, even if you do not have a qualifying child. See the rules and income limits in Publication 17 or Publication 596 for more information."

Is what you are referring to, "A non-custodial parent cannot claim EIC for a child that he or she has been given permission to claim as a dependent by a custodial parent." That talks about permission from a custodial parent. What about a court order?

I'm also seeing, "If you are entitled to claim a dependency exemption for your child based on the exception for children of divorced, separated, or never married parents described above, you can claim the child tax credit for your child who was under age 17 at the end of the year. See Publication 17 for additional rules."

Dad in fact may not be able to claim the earned income credit before the IRS. However, that doesn't mean it is a clear cut issue that that dad will not pursue.

But when I was filing her Earned Income Tax Credit, the IRS website states that the non-custodial parent is NOT eligible to claim any of the children, regardless of what the decree states.

Does the divorce decree say something like, "Wife agrees that Husband shall have the right to claim two of the four minor child as a dependent and shall be entitled to the exemptions and child tax credits allowed therefore under Federal and Texas state income tax law."

Even if the decree doesn't say "allowed therefore under Federal income tax law," its implied. However, if such language is right there in the decree, wife may be able to cite to that to help cool husband's jets.
Can mom execute waivers, declarations and/or other documents required by federal law to effect the parties' intent that dad be entitled to claim the Earned Income Tax Credit before the IRS? If so, then why didn't you have mom do that? If not, then ...
Even if dad can't claim the Earned Income Tax Credit before the IRS, that doesn't necessarily mean that dad is not entitled to the financial benefit of such a credit and dad will argue that mom owes him the financial benefit of claim such a credit because that is the spirit of the agreement and the intent of the parties or that mom will have to indemnify dad for any losses incurred due to his inability to claim the Earned Income Tax Credit before the IRS.

Her ex-husband is now ... stating that he can now do what he wants because she broke the decree.

Funny. No. The child custody order, etc. isn't void because dad didn't get his Earned Income Tax Credit.

When we filed, she claimed two of the children and he claimed the other two. So I didn't do anything wrong there. Phew! As far as EIC goes, we claimed three, which was the maximum allowed.

So, in the past, mom and dad claimed a total of four kids for the EIC when the maximum allowed was three? That sounds like IRS trouble for someone.

Obviously I went with what the IRS stated because I wanted to make sure I wasn't unknowingly committing tax fraud

Did you ask the IRS about whether mom can or has already executed waivers, declarations and/or other documents required by federal law to effect the parties' intent that dad be entitled to claim the Earned Income Tax Credit?

but now I'm afraid that I may have caused her legal problems with her ex.

Even if dad loses on the issue, that does not mean he doesn't now have a right to get an answer from a court on the issue. So, yea, it's a legal problem.

He is also demanding to know who did her taxes so he can contact them. Is this something he has a right to do?

Is your name on mom's tax return? When you say, "so she asked me if I would be willing to do her taxes for her," did you merely enter her raw data in to a tax software program and let the program figure out thing? I wouldn't go around saying "I prepare MILs taxes." That implies you are a licensed tax preparer (or an unlicensed tax preparer).

Mom owes the money to Dad.

Whether its via the filed tax returns or via the spirit of the agreement and the intent of the parties, its' possible dad could collect the money. However, as others pointed out, the state court cannot order that the NCP be allowed to claim earned income credit or daycare credits when not allowed by the IRS.

Likely, the divorce decree does not mention "earned income credit" by name for that very reason (e.g., the IRS would not allow it even if the court ordered it). Read through the divorce decree to see whether it mentions anything about "Earned Income Tax Credit" and report back here.

 

[momodylan]

Wow, now I'm REALLY confused. :

LdiJ~ Under her exemptions we filed TWO of the children, as agreed upon and per the decree. All of the children are school-age, and therefore don't go to daycare, so we didn't claim anything there. The ONLY time we claimed more than her two, was for the EIC, which stated a maximum of three children. Thanks for all your advice!

Punchcard~ She is sending me a copy of her decree, since we live out of state, so I'm not sure of the exact wording. I went with what she was telling me. This is the link I have from the IRS website : Qualifying Child Rules

I also called and spoke with someone at the IRS to verify.

As for them previously claiming more than allowed under EIC; no. I went back and reviewed the return, and it's only three. So no tax problems there!
No, my name isn't listed on her taxes as a preparer, but rather as a third party designee, so that I may talk to the IRS if need be. I just used H&R Block software. Sorry, I don't typically go around saying I prepare her taxes, I was just trying to get some help here. I guess I didn't realize the implications of stating I was preparing her taxes. Thanks!

Thank you all, again! As soon as I get her decree, I will be sure to read through it thoroughly and come back here. Thanks for all the great info!