Parents in Texas who have separated and who are negotiating custody might need to discuss how the child tax credit and its advanced payments might impact how they split custody. Parents who are already splitting custody might also be concerned.
Information on record is a determining factor
Parents who file jointly and are eligible to claim the credit and receive the advanced payments will not have an issue. However, parents who are not together and have a custody agreement might face an issue when it comes to the credit, even if they are each eligible since only one parent can claim the credit and receive the advanced payments. There are different ways parents can deal with this, including:
• The parent who has primary custody claiming the child each year
• The parent who has the higher income claiming the child each year
• Parents alternating who claims the child each year
Potential issues and impact of the child tax credit
It is important to remember that the advanced payments for the child tax credit are sent using the latest information available to the IRS, so this might present a problem. An example would be when parents alternate claiming the child. Since the parent who will technically receive the payments during the year is the same who claimed the child the year before, this is effectively providing that parent with two years of benefits. The IRS does have a portal available for parents to correct any information to reflect these issues, so parents should make sure that the information available to the IRS is their most current information.
Parents might also want to include how they will address this when they are drafting their parenting agreement. For example, some parents might consider a division different than a 50-50 split, giving one parent a slightly bigger amount of parenting time with the child and the ability to claim the child yearly.