Birth of Child / Adoption
Birth of child
The addition of a child to your family whether you had a new baby or adopted a child may entitle you to several tax benefits. For a child born or adopted (the adoption must be final) during the year you will be able to claim the child as a dependent on your tax return and receive tax benefits you maybe be entitled to are:
Credit for Child and Dependent Care Expense
Child Tax Credit
Earned Income Tax Credit
For more information see Publication 503, 596 and 972 at www.irs.gov.
Child Attended Day Care
If you are a working parent, or you were working and are now looking for work, you may be able to claim a credit for your child care expenses. Your dependent (under the rules for qualifying child) must have been under age 13 when care was provided. The credit may be as much as $1,050 for the expenses for one qualifying child or $2,100 for more than one child, depending on your adjusted gross income.
Adopted a Child
The Credit for Qualified Adoption Expenses, or the Adoption Credit, is a nonrefundable credit based on the amount of qualified adoption expenses you paid to adopt a child. Each dollar spent on adoption, up to $14,080 per child, is included in the credit. If you claim a special needs child, you may claim the full credit regardless of your expenses. This credit is available for each child you adopt as long as the child is not your spouse's child or a child from a surrogate mother. The credit is nonrefundable so you can only zero out your income tax liability with it. Any remaining credit may be carried over for up to five years.
Changed Marital Status
If you obtain an annulment that declares your marriage never existed, you are considered unmarried for this and any previous tax years. You must amend your tax returns for all the tax years not affected by the statute of limitations for filing a return (usually three years) to show this change in marital status.
If you got married during 2019 your filing status may have changed. You and your spouse will need to decide if you are going to file a joint return or separate returns. There are several tax consequences you should be aware of when making this decision. Generally it is most advantageous to file a joint return. The standard deduction for joint filers is $24,400 and for separate filers it is $12,200 ($0 if your spouse itemized deductions on their separate return). If one spouse itemizes their deductions then the other spouse must also itemize their deductions when they file separate returns. Additionally there are several tax benefits you cannot take if you elect married filing separately:
Student Loan Interest
Tuition and Fees deduction
Earned Income Tax Credit
Premium Tax Credit
Advanced payment of the Premium Tax Credit
Note: On the new Tax Reform n divorces finalized after January 1, 2019, the person paying spousal support can no longer deduct the amount from their taxes. For recipients, spousal support payments are no longer considered taxable income.J
Instructions for Form 8379
If your refund was used to offset debt for past due federal income tax, other federal debt, such as student loans, and child and spousal support, you filed a joint return and only one spouse owes the past due amount, the other spouse is considered an injured spouse. The injured spouse can file Form 8379, Injured Spouse Allocation to receive their portion of the refund. See instructions for Form 8379 at www.irs.gov
Spouse suffered disability
Your spouse may be eligible for the Credit for the Elderly or the Disabled if they were age 65 or older, or they retired on permanent and total disability and have taxable disability income.
By requesting innocent spouse relief, you can be relieved of responsibility for paying tax, interest, and penalties if your spouse (or former spouse) improperly reported items or omitted items on your tax return. Generally, the tax, interest, and penalties that qualify for relief can only be collected from your spouse (or former spouse). However, you are jointly and individually responsible for any tax, interest, and penalties that do not qualify for relief. The IRS can collect these amounts from either you or your spouse (or former spouse). Innocent spouse relief only applies to individual income or self-employment taxes. For example, Household Employment taxes, Individual Shared Responsibility payments, and business taxes and trust fund recovery penalty for employment taxes are not eligible for innocent spouse relief.
The IRS will figure the tax you are responsible for after you file Form 8857. You are not required to figure this amount. But if you wish, you can figure it yourself. See How To Allocate the Understatement of Tax, within Publication 971 (PDF).
You must meet all of the following conditions to qualify for innocent spouse relief.
You filed a joint return which has an understatement of tax due to erroneous items, defined below, of your spouse (or former spouse).
You establish that at the time you signed the joint return you did not know, and had no reason to know, that there was an understatement of tax. See Actual Knowledge or Reason to Know, defined below.
Taking into account all the facts and circumstances, it would be unfair to hold you liable for the understatement of tax. See Indications of Unfairness for Innocent Spouse Relief, below.
You and your spouse (or former spouse) have not transferred property to one another as part of a fraudulent scheme. A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, ex-spouse, or business partner.
Erroneous items are either of the following.
Unreported income. This is any gross income item received by your spouse (or former spouse) that is not reported.
Incorrect deduction, credit, or basis. This is any improper deduction, credit, or property basis claimed by your spouse (or former spouse).
The following are examples of erroneous items.
The expense for which the deduction is taken was never paid or incurred. For example, your spouse, a cash-basis taxpayer, deducted $10,000 of advertising expenses on Schedule C of your joint Form 1040, but never paid for any advertising.
The expense does not qualify as a deductible expense. For example, your spouse claimed a business fee deduction of $10,000 that was for the payment of state fines. Fines are not deductible.
No factual argument can be made to support the deductibility of the expense. For example, your spouse claimed $4,000 for security costs related to a home office, which were actually veterinary and food costs for your family's two dogs.
Actual Knowledge or Reason To Know
You knew or had reason to know of an understatement if:
You actually knew of the understatement, or
A reasonable person in similar circumstances would have known of the understatement.
If you actually knew about an erroneous item that belongs to your spouse (or former spouse), the relief discussed here does not apply to any part of the understatement of tax due to that item. You and your spouse (or former spouse) remain jointly liable for that part of the understatement. For information about the criteria for determining whether you actually knew about an erroneous item, refer to Relief from Separation of Liability for more information about Actual Knowledge.
Reason to Know
If you had reason to know about an erroneous item that belongs to your spouse (or former spouse), the relief discussed here does not apply to any part of the understatement of tax due to that item. You and your spouse (or former spouse) remain jointly liable for that part of the understatement.
The IRS will consider all facts and circumstances in determining whether you had reason to know of an understatement of tax due to an erroneous item. The facts and circumstances include:
The nature of the erroneous item and the amount of the erroneous item relative to other items.
The financial situation of you and your spouse (or former spouse).
Your educational background and business experience.
The extent of your participation in the activity that resulted in the erroneous item.
Whether you failed to ask, at or before the time the return was signed, about items on the return or omitted from the return that a reasonable person would question.
Whether the erroneous item represented a departure from a recurring pattern reflected in prior years' returns (for example, omitted income from an investment regularly reported on prior years' returns).
Partial Relief When Portion of Erroneous Item is Unknown
You may qualify for partial relief if, at the time you filed your return, you had no knowledge or reason to know of only a portion of an erroneous item. You will be relieved of the understatement due to that portion of the item if all other requirements are met for that portion.
If at the time you signed your joint return, you knew that your spouse did not report $5,000 of gambling winnings. The IRS examined your tax return several months after you filed it and determined that your spouse's unreported gambling winnings were actually $25,000. You established that you did not know about, and had no reason to know about, the additional $20,000 because of the way your spouse handled gambling winnings. The understatement of tax due to the $20,000 will qualify for innocent spouse relief if you meet the other requirements. The understatement of tax due to the $5,000 of gambling winnings will not qualify for relief.
Indications of Unfairness for Innocent Spouse Relief
The IRS will consider all of the facts and circumstances of the case in order to determine whether it is unfair to hold you responsible for the understatement.
The following are examples of factors the IRS will consider.
Whether you received a significant benefit (defined next), either directly or indirectly, from the understatement.
Whether your spouse (or former spouse) deserted you.
Whether you and your spouse have been divorced or separated.
Whether you received a benefit on the return from the understatement.
Refer to Factors for Determining Whether to Grant Equitable Relief on the Equitable Relief page for other factors.
A significant benefit is any benefit in excess of normal support. Normal support depends on your particular circumstances. Evidence of a direct or indirect benefit may consist of transfers of property or rights to property, including transfers that may be received several years after the year of the understatement.
You receive money from your spouse that is beyond normal support. The money can be traced to your spouse's lottery winnings that were not reported on your joint return. You will be considered to have received a significant benefit from that income. This is true even if your spouse gives you the money several years after he or she received it.