By James McNair
The Cincinnati Enquirer
In what appears to be an unintended consequence of the tax cuts enacted this year, divorced parents who take turns claiming their children on tax returns will receive $400 more per child in credits than other parents in the 2003 tax year.
As part of the $350 billion tax-cut package enacted May 28, tax credits for children under 17 were raised to $1,000 from $600 for each of the first two children. To stimulate the economy, President Bush and Congress called for the $400 increase to be paid this summer as an advance on 2003 tax returns. Many checks have already been mailed.
But because of the combined effect of divorce agreements and the government's decision to mail the advances to whoever received the child credit for 2002, some divorced couples will receive $1,400 in cash and tax credits between them.
If, for example, the divorce decree called for the ex-husband to receive the 2002 child credit on a child, then he would receive the $400 check for that child this summer. And when the ex-wife claims the child credit on her 2003 return, she will be entitled to claim $1,000.
"It's the way the law was written," said Chris Kerns, an IRS spokesman in the agency's Cincinnati office.
With thousands of divorced parents sharing the tax benefits of their children, the $400 in additional credits could quickly add up to millions for the U.S. Treasury.
Terry Gilkey and Gwen Wise, a married couple in College Hill, thought it was a mistake. Gilkey has an 8-year-old daughter with a former wife. Under the terms of their divorce, his ex-wife could claim the daughter for tax purposes in 2002, he in 2003. Learning that she would be receiving a $400 advance on a tax credit that he would claim, Gilkey and Wise wrote to the IRS for clarification - and was told that Gilkey and his former wife would indeed receive a total of $1,400 for 2003.
Gilkey said the provision sounds excessively generous.
"They shouldn't be paying this out to people who are not supposed to be getting it," he said. "I understand the need for a spark to the economy, but I don't think this is a good idea."
"Many times, the parties simply structure an arrangement between themselves to alternate the child exemption, and it gets embedded in the divorce decree," said Scott Santangelo, who practices family law in Hyde Park. "The tax credit is a new wrinkle on the exemption."
George Yin, chief of staff of Congress' Joint Committee on Taxation, confirmed that the tax law language provides for the $400 overpayment.
"It was contemplated that the whole advance payment mechanism would have a certain amount of inaccuracy in it," Yin said. "Some people ineligible for the credit will receive the credit this year solely because they received it last year. That doesn't have to be repaid."
Yin said he wasn't aware of the child credit quirk in divorce cases. He expressed no concern about it.
"There are going to be these oddball situations," he said, "and certainly what you describe is one of those oddball situations."
Kerns said advance child tax credit checks will be mailed to 25.3 million people nationwide, including 992,000 in Ohio, 582,000 in Indiana and 349,000 in Kentucky. He could not estimate the cost of giving an extra $400 to divorced couples alternating the credits.
"It'll be next to impossible to calculate that without looking at, state by state, how many parents have divorce terms calling for alternating years of claiming tax credits for dependents," Kerns said.
TOP MONDAY STORIES
Giuliani rides race car at Bunning fundraiser
Tax quirk could cost millions
Man shot to death at fishing club
Greenhills looks to turn back clock
TOP SUNDAY STORIES
Springer's TV fame means edge in D.C. bid
Thousands of kids in distress
Bargain hunters wheel and deal at 'Longest Yard Sale'
Freedom Center wows officials
Viral infection kills soldier
MONDAY LOCAL COLUMNS
RADEL: Good summer on bike trail
AMOS: Owners say homes 'lakeside' to sludge pond
'For sale' sign on car sparks lawsuit
Avondale Days begins sixth year
Hey, Loveland and Symmes!
AROUND THE TRISTATE
Five levies to be decided Tuesday
Tristate A.M. Report
Hometown Heroes: Hamilton man aided March of Dimes for 20 years
Teens' Costa Rica trip combines work and play
Barg Salt Run Road overhaul planned
Good News: Keeping teachers up to date
Obituary: Jerry W. Goins had powerful work ethic
Obituary: Robert Hampton, co-founder of Fairfield business
UC project attempts to give life to Indian earthworks
Ohio Moments: Baseball star born in Dayton
Old engine collection to be sold at auction
Weapons popular with Ind. legislators
Manure caused fish kill in Indiana creek