Color of Money

In one scenario, the qualifying custodial parent — designated as such for tax purposes — releases a dependency tax claim to the noncustodial parent. In such cases, whichever parent claimed a child on his or her 2019 return might have received the $500.

In its guidance document, the IRS said: “When the parent who did not receive an additional payment files their 2020 tax return next year, they may be able to claim up to an additional $500 per-child amount on that return if they qualify to claim the child as their qualifying child for 2020.”

This may be the situation for Dianne, a divorced mother from Virginia, who asked that her last name not be used out of privacy concerns. She and her ex-husband have shared custody and alternate claiming their son on their taxes. She gets even years. He gets odd years.

Although the IRS is using the 2018 and 2019 tax years to determine the stimulus payments, the financial relief is actually considered an advanced credit for 2020.

“My ex and I are on relatively good terms, but we don’t really talk about finances,” said Dianne, who has received her $1,200 based on her 2019 return, but not the additional money for her son. “If he got the $500, he would never tell me.”

For parents in a similar situation, if they qualify for the extra $500, they could claim it next year, according to the IRS guidance.

“I do feel kind of mixed about the double-dipping,” said Dianne, whose income has dropped significantly because of coronavirus shutdowns. “Frankly, I don’t think that it’s fair. But I’m sure it’s very difficult to tie one child to two separate households. However, if I’m entitled to the payment, I’m going to take it.”

The IRS also addressed confusion among a subset of stimulus recipients who filed an “injured spouse” claim over pastdue child support. The law allows an “offset,” withholding stimulus funds from a spouse who owes back child support. The provision should only affect payments to that spouse. However, in some cases, the IRS mistakenly offset payments to both parents.

The IRS said it is working with the Bureau of the Fiscal Service, the Department of Health and Human Services, and the Office of Child Support Enforcement to address the issue. The injured spouse will receive his or her unpaid half when the matter is cleared up, the agency said.

It is difficult to expect perfection from a government in the grips of a pandemic. Even so, the federal stimulus effort seems to have brought more than its share of drama.

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