Is my sister's ex trying to pull a fast one?


D

D.F. Manno

My sister and the SOB ....... that is her ex have a son.
Since the son lives with her most of the time, she's
considered the custodial parent.

She got an e-mail from the SOB saying he has learned that if
he can not claim the son as a dependent his payments into a
dependent-care FSA will be taxable. (Well, duh! What did he
think the word "dependent" is there for?) He proposes that
she sign a Form 8332 allowing him to claim the boy, so that
he will avoid paying the taxes on his FSA contributions. He
says he would reimburse my sister for the lost child tax
credit.

Then he overplays his hand by saying that she can instead
claim the child-care credit for not only her expenses but
_his_ as well, saying that they both would come out ahead as
a result. My understanding is that she would not be able to
take the child-care credit for her expenses unless she can
claims the boy as a dependent. She could _never_ take the
credit for the SOPB's expenses. Am I right about this?

Also, I have a nagging feeling that there's something else
wrong with this that I'm missing. Any ideas?

TIA.

--
D.F. Manno
(e-mail address removed)
The problem with being sure that God is on your side is that
you can't change your mind, because God sure isn't going to
change His. (Roger Ebert)
 
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Paul Thomas, CPA

D.F. Manno said:
My sister and the SOB ....... that is her ex have a son.
Since the son lives with her most of the time, she's
considered the custodial parent.

She got an e-mail from the SOB saying he has learned that if
he can not claim the son as a dependent his payments into a
dependent-care FSA will be taxable. (Well, duh! What did he
think the word "dependent" is there for?) He proposes that
she sign a Form 8332 allowing him to claim the boy, so that
he will avoid paying the taxes on his FSA contributions. He
says he would reimburse my sister for the lost child tax
credit.

Then he overplays his hand by saying that she can instead
claim the child-care credit for not only her expenses but
_his_ as well, saying that they both would come out ahead as
a result. My understanding is that she would not be able to
take the child-care credit for her expenses unless she can
claims the boy as a dependent. She could _never_ take the
credit for the SOPB's expenses. Am I right about this?
A qualifying child for the child care credit does not have
to be a dependent of the taxpayer claiming the credit. But
she can't claim the amount he pays.

From what you say in your post, she's the only one entitled
to the credit because the child lives with her for the
greater part of the year.
Also, I have a nagging feeling that there's something else
wrong with this that I'm missing. Any ideas?
Me thinks he's trying to double dip.

It may cost a bit of money, but have her run this past her
divorce attorney, maybe get him/her to draft a letter
explaing the rules of conduct.
 
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A

A.G. Kalman

D.F. Manno said:
My sister and the SOB ....... that is her ex have a son.
Since the son lives with her most of the time, she's
considered the custodial parent.

She got an e-mail from the SOB saying he has learned that if
he can not claim the son as a dependent his payments into a
dependent-care FSA will be taxable. (Well, duh! What did he
think the word "dependent" is there for?) He proposes that
she sign a Form 8332 allowing him to claim the boy, so that
he will avoid paying the taxes on his FSA contributions. He
says he would reimburse my sister for the lost child tax
credit.

Then he overplays his hand by saying that she can instead
claim the child-care credit for not only her expenses but
_his_ as well, saying that they both would come out ahead as
a result. My understanding is that she would not be able to
take the child-care credit for her expenses unless she can
claims the boy as a dependent. She could _never_ take the
credit for the SOPB's expenses. Am I right about this?

Also, I have a nagging feeling that there's something else
wrong with this that I'm missing. Any ideas?
The custodial parent is the only one who can make a claim for
dependent care benefits. This is true even if the exemption
is released to the noncustodial parent. A noncustodial parent
is not eligible for dependent care benefits and as far as I
can see, the contributions would still be taxed. If she
incurs childcare expense she can claim only her own expense
in filing for the credit.
 
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Phil Marti

D.F. Manno said:
My sister and the SOB ....... that is her ex have a son.
Just a caution here, Unc. When you have the facts on your
side, invective is unnecessary. It can even be harmful.
There may be absolutely no way in the world that she would
ever get back with the SOB, but I've seen people do a lot
more stupid things. In such event, everyone who ever spoke
against him, even when confirming what she just said, is
dead meat.
Since the son lives with her most of the time, she's
considered the custodial parent.
Right

She got an e-mail from the SOB saying he has learned that if
he can not claim the son as a dependent his payments into a
dependent-care FSA will be taxable.
It's going to be taxable even with the dependency exemption.
The child can qualify only the custodial parent for this
credit. They cannot choose to pass it off the way they can
the dependency exemption.
(Well, duh! What did he
think the word "dependent" is there for?)
See there? You didn't understand it either.
He proposes that
she sign a Form 8332 allowing him to claim the boy, so that
he will avoid paying the taxes on his FSA contributions.
As noted, it won't work unless he files a fraudulent return
stating that the kid lived with him.
He says he would reimburse my sister for the lost child tax
credit.

Then he overplays his hand by saying that she can instead
claim the child-care credit for not only her expenses but
_his_ as well, saying that they both would come out ahead as
a result. My understanding is that she would not be able to
take the child-care credit for her expenses unless she can
claims the boy as a dependent.
This is not true. As noted before, the child care credit is
available only to the custodial parent. If you have
sister's best interest in mind you'll tell her that claiming
expenses on her return that she didn't incur is called
fraud.

It sounds to me like Sis is best off telling ex "Thanks, but
no thanks." She's fair warned that doing otherwise will
bring her nothing but deserved trouble.
 
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