Oh No! Taxes Again? Blended family taxes require some thought.

So it’s that time again. Managing blended family taxes can be tricky and the New Year brings with it the inevitability of Uncle Sam. It is important to understand the legalities of what you can and cannot do while still utilizing your situation to the fullest advantage.

Communication with your ex-spouse is very important as far as the understanding of who will be claiming the children. There are advantages to claiming your children, but these advantages decrease as the number of children on your return increase. Blennded family taxes simply require more to consideration.

When it comes to blended family taxes, know your state law. Some states automatically designate who receives the right to claim the children. However, Joint states that award “Joint Conservator” to both parents really require that you have an open discussion as to who will claim the children. As a result, it is best to agree on the most advantageous scenario for all. If you cannot agree, there are strict IRS codes that relate to a qualified child and determine who is able to claim them.

How does the IRS determine a qualifying child?

In general, to be a qualifying child, a person must satisfy four tests:

Relationship: the taxpayer's child or stepchild (whether by blood or adoption), foster child, sibling or stepsibling, or a descendant of one of these is considered a qualifying child.

Residence: has the same principal residence for more than half the tax year. Exceptions apply, in certain cases, for children of divorced or separated parents, kidnapped children, temporary absences, and for children who were born or died during the year.

Age: must be under the age of 19 at the end of the year, or under the age of 24 if a full-time student for at least five months of the year, or be permanently and totally disabled at any time during the year.

Support: did not provide more than one-half of his/her own support for the year.

Still, as our culture moves towards more co-parenting situations, there still may be some ambiguity regarding the blended family taxes. If this is the case, it is wisest to seek a compromise. If compromise is not possible then seek out a Certified Public Accountant to advise you on your individual situation.

The IRS publishes the following determining factors when agreements cannot be reached:

If a child is claimed as a qualifying child by two or more individuals in a given year, the child will be the qualifying child of:

-the parent

-if both are the child’s parent, the one with whom the child lived for the longest time during the year, or, if the time was equal, the parent with the highest AGI;

-if no claimant is the child’s parent, the claimant with the highest adjusted gross income (AGI).

Ultimately, if agreements cannot be met, a ruling from a judge would have the final say. Hopefully, such lengths would not be necessary and you and your ex-spouse can find a middle ground.

No one enjoys facing the IRS and taxes, but ironing these decisions out ahead of time will give you and your family a good foundation upon which to proceed. As with most things, open communication and compromise are often key factors in how smoothly a situation is resolved.

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