Final answer:
When more than one taxpayer claims the same qualifying child, the IRS uses tiebreaker rules to determine who can claim the child for tax benefits. These rules favor the parent with whom the child lived the longest during the tax year or the one with the higher adjusted gross income if the time is equal. Such compliance is crucial for the proper application of tax benefits like the earned income tax credit.
Step-by-step explanation:
When more than one taxpayer claims the same qualifying child, the Internal Revenue Service (IRS) has tiebreaker rules to determine who has the right to claim the associated benefits, such as the earned income tax credit, child tax credit, or use of head of household filing status.
Typically these tiebreaker rules favor the parent with whom the child lived for the longer period of time during the tax year. In the case where the child lived with both parents for the same amount of time, the parent with the higher adjusted gross income would have the right to claim the child.
If neither claimant is the child's parent, the one with the higher adjusted gross income would be favored. In relation to tax policy measures intended to assist low-income families, such as mitigation of the poverty trap via the earned income tax credit, it's important to comply with these rules to ensure the appropriate distribution of tax benefits and to avoid complications or audits.
For example, the earned income tax credit is a measure aimed at reducing the impact of the poverty trap by phasing out the credit slowly as income rises. However, if more than one taxpayer claims the same qualifying child, it could lead to complications in the application of this benefit, potentially resulting in disputes or the necessity for taxpayers to pay back credits if claimed inappropriately.