Parents who are divorced, separated, never married or live apart and who share custody of a child with an ex-spouse or ex-partner need to understand the specific rules about who may be eligible to claim the child for tax purposes. This can make filing taxes easier for both parents and avoid errors that may lead to processing delays or costly tax mistakes.
Only one person may be eligible to claim the qualifying child as a dependent.
Only one person can claim the tax benefits related to a dependent child who meets the qualifying child rules. Parents can’t share or split up the tax benefits for their child on their respective tax returns.
It’s important that each parent understands who will claim their child on their tax return. If two people claim the same child on different tax returns, it will slow down processing time while the IRS determines which parent’s claim takes priority.
Custodial parents generally claim the qualifying child as a dependent on their return.
- The custodial parent is the parent with whom the child lived for the greater number of nights during the year. The other parent is the noncustodial parent.
- In most cases, because of the residency test, the custodial parent claims the child on their tax return.
- If the child lived with each parent for an equal number of nights during the year, the custodial parent is the parent with the higher adjusted gross income.
Tie-breaker rules may apply if the child is a qualifying child of more than one person.
- Although the child may meet the conditions to be a qualifying child of either parent, only one person can actually claim the child as a qualifying child, provided the taxpayer is eligible.
- People should carefully read Publication 504, Divorced or Separated Individuals to understand who is eligible to claim a qualifying child.
Noncustodial parents may be eligible to claim a qualifying child.
Special rules apply for a child to be treated as a qualifying child of the noncustodial parent.
Publication 501, Dependents, Standard Deduction, and Filing Information
Whom May I Claim as a Dependent?
Share this tip on social media — #IRSTaxTip: Claiming a child as a dependent when parents are divorced, separated or live apart. https://go.usa.gov/xJ7Kb
Prior to covid-19, the gig economy seems to be on steriods. The emergence of Amazon, Uber and Lyft, Airbnb, InstraCart, Grubhub, DoorDash were all new entries into the way we now live. More and more people tend to use gig work to supplement their income.
If you take up gig work on a part-time or full-time basis, often through a digital platform like an app or website. Gig work, such driving a car for booked rides, selling goods online, renting out property, or providing other on-demand work, is taxable and must be reported as income on the worker’s tax return.
Here are some things gig workers should know to stay on top of their tax responsibilities:
Gig work is taxable:
- Earnings from gig economy work is taxable, regardless of whether an individual receives information returns. The reporting requirement for issuance of Form 1099-K changed for payments received in 2022 to totals exceeding $600, regardless of the total number of transactions. This means some gig workers will now receive an information return. This is true even if the work is full-time or part-time.
- Gig workers may be required to make quarterly estimated tax payments.
- If they are self-employed, gig workers must pay all their Social Security and Medicare taxes on their income from the gig activity
Proper worker classification:
While providing gig economy services, it is important that the taxpayer is correctly classified.
- This means the business, or the platform, must determine whether the individual providing the services is an employee or independent contractor.
- Taxpayers can use the worker classification page on IRS.gov to see how they should be classified.
- Independent contractors may be able to deduct business expenses, depending on tax limits and rules. It is important for taxpayers to keep records of their business expenses.
Paying the right amount of taxes throughout the year:
- An employer typically withholds income taxes from their employees’ pay to help cover income taxes their employees owe.
- Gig economy workers who aren’t considered employees have two ways to cover their income taxes:
- Submit a new Form W-4 to their employer to have more income taxes withheld from their paycheck if they have another job as an employee.
- Make quarterly estimated tax payments to help pay their income taxes throughout the year, including self-employment tax.
The Gig Economy Tax Center on IRS.gov answers questions and helps gig economy taxpayers understand their tax responsibilities.
Publication 5369, Gig Economy and your taxes: things to know
Publication 1779, Independent Contractor or Employee
Is My Residential Rental Income Taxable and/or Are My Expenses Deductible?
Share this tip on social media — #IRSTaxTip: Here are some things gig economy workers should know about their tax responsibilities. http://go.usa.gov/xJ7KX
Below are the IRS 1099-Misc. rules regarding paying someone for services they provide.
File Form 1099-MISC for each person to whom you have paid during the year:
- At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest.
- At least $600 in:
- Prizes and awards.
- Other income payments.
- Medical and health care payments.
- Crop insurance proceeds.
- Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish.
- Generally, the cash paid from a notional principal contract to an individual, partnership, or estate.
- Payments to an attorney.
- Any fishing boat proceeds.
In addition, use Form 1099-MISC to report that you made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.
Source: IRS Rules for 1099-Misc