One of the biggest tax pains in the last two decades in the tax preparation world has been when two separated or divorced parents both try to claim the same child - regardless of who had the right to. You see, the IRS doesn't care what a separation or divorce decree says. They got tired of reading them to make determinations. So they came us with the custodial parent rules.
Briefly, the custodial parent is the one where the child stays the most nights of the calendar year. The only legal way the non-custodial parent can claim the child is if the custodial parent gives the non-custodial parent Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent. This form is used to release the right to claim the child tax credit and any other related exemptions to the non-custodial parent. The non-custodial parent must attach this form to their tax return in order to claim the child tax credit.
Of course there are those non-custodial parents who try to claim the child illegally and rush to e-file there return first - because the first one to file locks out that child's social security number for any other filer. Needless to say this created a problem for the custodial parent, because they would have to file a paper return to claim their child along with proof that the child lived with them more than half the year. The the IRS would write to the non-custodial (they don't know which is really the custodial parent) and give them 30 days to prove they can legally claim the child. When they can't, the IRS approves the refund for the custodial parent and sends a bill to the non-custodial parent for repayment of the credits plus penalties and fees.
Following along? Well, this could take months to straighten out because everything had to be done manually. The IRS finally decided to do something to speed up this process. Hurray!
Starting with the 2025 filing season, the IRS will now accept certain e-filed returns that claim dependents who have already been claimed on another taxpayer’s return. IRS news release IR-2024-294 explains that the IRS will accept the second e-filed return if the primary taxpayer on the second return includes a valid Identity Protection Personal Identification Number (IP PIN). E-filed returns with duplicate dependent claims that do not include an IP PIN will continue to be rejected.
(IP PINs are free to get by going to irs.gov/ippin and registering for one. I actually believe everyone should have one, because they prevent a crook from stealing your social security number and electronically file a return with it. Each January, you receive a letter from the IRS with that year's IPPIN number. If it is not included on the return they will not accept it. Best protection you can do for yourself to prevent identity theft in the tax world.)
The news release notes that using an IP PIN helps protect the taxpayer from identity theft or other situations in which dependents are claimed fraudulently or incorrectly. The new guidance applies to Forms 1040, 1040-NR, and 1040-SS. An IP PIN is also required to claim a duplicate dependent on Forms 2441 (Child and Dependent Care Expenses), 8863 (Education Credits), and Schedule EIC that are attached to Form 1040. Tax returns with duplicate dependent claims for prior years such as tax year 2023 or 2022 must still be paper filed if the taxpayer knows or receives notice that dependents were previously claimed on another return.
Example: Charlene e-files her 2024 tax return claiming her two qualifying children, John and Jill. Her return includes her IP PIN. A few weeks earlier, Christine’s cousin Charles had already e-filed his return and claimed the children. John and Jill are not Charles’s qualifying children. Since Christine included an IP PIN on her return it will be accepted for e-filing and the IRS will accelerate issuing her tax refund. In previous filing seasons Christine’s e-filed return would have been rejected; her only option would have been to file a paper return and explain her situation.
Of course, returns are still subject to eligibility requirements and verification procedures. For instance, EIC claims must include Schedule EIC and cannot be paid before February 15.