Karen Lee Posted March 6, 2008 Report Posted March 6, 2008 Taxpayer and spouse - divorced. One adopted child. Spouse (mother) has legal custody and child is under 24 and full time student. Father is allowed dependency (personal exemption) and CTC. Mother qualifies for HOH and EIC (no dependency and no CTC). Why do I post this? The State of Oregon disallowed mother's EIC on state return because it does not follow federal guidelines, "if you and another person have the same qualifiying child, you and the other person can decide which of you will treat the child as a qualifying child. That person can tall all of the following tax benefits (provided the person is eligible for each benefit) based on the qualifying child. exemption CTC dependent care credit EIC exclusion from income for dependent care benefits The other person cannot take any of these benefits based on this qualifying child. In other words, you and the other person cannot agree to divide these tax benefits between you. It appears the child for whom you claimed the EIC is the qualifying child of another person; therefore your EIC has not been allowed." This was for TY 2006 Father files Single w/dependent Mother files HOH I've missed something somewhere. Isn't there an exception for divorced and separated parents? Set me straight please. Karen Quote
jainen Posted March 6, 2008 Report Posted March 6, 2008 >>Isn't there an exception for divorced and separated parents?<< California doesn't conform to this part of the code either. Quote
taxdan Posted March 7, 2008 Report Posted March 7, 2008 In the above scenario, does the taxpayer still get to file as HOH on the OR return and just not allowed any of the other tax benefits of having a qualified child? Quote
Karen Lee Posted March 7, 2008 Author Report Posted March 7, 2008 The denial letter states: "This federal law applies to your Oregon return as well. It appears the child for whom you claimed the EIC is the qualifying child of another person; therefore, your EIC has not been allowed. IRC 32, ORS 315.266 Could this be a mistake on the part of Oregon Dept of Revenue? My client did not forward this letter to me timely and I can't do anything about 2006 however I believe I have prepared correctly. Just need some opinions and suggestions to avoid this for 2007 besides informing my client to let me help in these situations. I am in Washington and only prepare state returns when absolutely necessary. Karen Quote
jainen Posted March 7, 2008 Report Posted March 7, 2008 >>Father is allowed dependency<< Does this mean they followed the rules for divorced/separated parents, i.e. form 8332? Are YOU following those rules this year? When two people claim the child without that form, they BOTH get a letter. If you don't respond with an explanation, you lose. Quote
Karen Lee Posted March 7, 2008 Author Report Posted March 7, 2008 Yes on the 8332. Standard practice in my office with divorced parents. Do YOU have any other insights besides assuming I did not follow the rules? The Oregon State denial letter states that they follow the federal rules however it does not appear this happened. Karen Quote
jainen Posted March 7, 2008 Report Posted March 7, 2008 >>The Oregon State denial letter states that they follow the federal rules however it does not appear this happened.<< You are not reading the letter correctly. When it says, "the child for whom you claimed the EIC is the qualifying child of another person," they are NOT talking about Form 8332, which the absent parent can't use to treat the dependent as a qualifying child. Apparently someone else claimed the child WITHOUT Form 8332, and your client didn't resolve it in time. Quote
Karen Lee Posted March 7, 2008 Author Report Posted March 7, 2008 OK... I prepare the returns for mother, father and child...child is dependent filer, father takes dependency and CTC (w/8332 attached) according to divorce decree and Mother is custodial and files HOH with qualifying child and gets EIC (no dependency or CTC or ACTC). I guess I'll follow my gut and inform Mother to let me know if this happens again so it can be addressed timely. Mother lives in Oregon. Father in Washington. No Oregon return done on Father. I feel Oregon was wrong and TP did not respond timely. It is only Oregon that the EIC was disallowed. Thanks Karen Quote
jainen Posted March 7, 2008 Report Posted March 7, 2008 >>I feel Oregon was wrong and TP did not respond timely.<< Doubtful Liability Relief http://www.oregon.gov/DOR/PERTAX/docs/101-698.pdf (Probably won't work because you are not disputing a tax assessment.) Quote
Karen Lee Posted March 7, 2008 Author Report Posted March 7, 2008 Thank you for your time and effort. Karen Quote
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