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Common tax mistakes related to child support

After a divorce, it can be difficult to find one's new equilibrium, especially when it comes to financial matters. The separation of finances from an ex-spouse becomes even more complex when there are minor children in the marriage, too, because it creates shared obligations for both people in the dissolving union. Those obligations are often mediated by the court, which makes determinations about custody and child support in accordance with state law.

What the court does not do is advise the newly divorced couple about the changes to their obligations, especially their tax obligations. As a result, there are a lot of people who make tax-related mistakes because they have misunderstandings about child support.

Who can claim the children as dependents?

Dependent minors provide a substantial tax credit that is meant to help offset the costs that raising children can come with, but only one of the households is able to claim that credit. If there is a breakdown in communication or a misunderstanding, this can create legal complications for both parents. Here is how you can understand who should claim the credit:

  • The parent the child lives with the majority of the year is the custodial parent.
  • If the custodial parent meets all other requirements for claiming the credit for a child, then he or she can do so.

If the noncustodial parent wishes to claim the credit, then the custodial parent needs to sign a Form 8332, which allows for the release or revocation of the release of that parent's own rights to claim the credit.

The taxability of child support

The other major mistake that people tend to make is regarding the taxability of child support. For the parents paying support, they do pay income tax on the money before paying the support. For the parents receiving child support, there is no duty to report the income or to pay taxes on it.

If you are going through a divorce

Having the right attorney is the key if you are trying to make sure you get what you need out of a divorce. Whether you simply want to be sure your child support payments are fair for both parties or you are seeking custody, the right lawyer can make sure your interests are protected throughout the process so that you are able to move forward with your life and get back on your feet. Call an attorney today if you are starting divorce proceedings, and get the advice you need.

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