Tax Update 2022: Child Tax Credit for Separated or Divorced Parents

If you're a divorced or separated parent, now is the time to discuss who will claim each child as dependent on your 2021 tax return to maximize the child tax credit. Talking with a family law attorney can also give you more insight.

A Family Law Attorney May Help Increase Your Child Tax Credit

We've talked at length about the 2021 child tax credit and which divorced parent gets it. But if separated or divorced parents continue to split or alternate child tax dependency, they may be leaving real money on the table in 2021 and 2022.

Well-informed parents should consider the special tax rules for the current year and next year that have dramatically increased the child tax credit.

A qualified child age 6 to 17 listed on a parent's/parents' return will result in up to a $3,000 (per child) credit for the parent who claims the child if income is within the required parameters.

A child under the age of 6, who is a qualified dependent, will allow a parent/parents a tax credit of $3,600. If you don't owe taxes, the unused credit amount is paid to the parent by Uncle Sam.

Usually, one-half of the credit will be used or paid to the parent after filing the final return, and each dependent is named.

Identify Which Parent Takes Each Dependent for Tax Purposes

If a parent has received tax credit payments already but fails to deserve the tax credit, you'll have to return the money to the government.

Since July 15, 2021, parents who appeared to qualify based on their 2020 tax return have received one-half the pre-paid enhanced child tax credits with 50% allocated over the six months of July to December.

The parent(s) could have received $250 or $300 a month for each qualified child. If the parents were fully qualified to receive the child tax credit, they would have received $1,500 to $1,800 with the tax credit balance applied to the 2021 tax return.

In some cases, the parent's actual income in 2020 during the pandemic was meager, and 2021 tax credit payments were sent. If due to higher revenue in 2021, the parent who received the tax checks doesn't qualify for the tax credit, some or all of the money received over the six months will be due and owing when filing the 2021 federal tax return.

Parents need to confer and make a wise decision as to who claims each child as a dependent on their 2021 tax return(s) to maximize the tax credit and adjust the payments, so they flow to the correct parent to qualify for the balance of the 2021 tax credit. Our family law attorneys can support in deciding dependency claims.

Child Tax Credit with Separated Couples

What if you're separated but not divorced and plan to continue filing jointly in 2021?

If your combined income is too high to qualify for the child tax credit and you file separately, the lower-income parent qualifies for the enhanced child tax credit.

If you separated in 2021 (from July 1 through the end of the year), a parent could qualify as Head of Household status if they satisfy the IRS requirements. In addition, the parent who legitimately files as Head of Household would be eligible for the child tax credit benefit if that parent's income were under $112,500.

Both the dependency declaration and the physical custody schedule are relevant.

In many cases, parents equally share physical custody; however, to file as Head of Household, that parent needs to have more than equal custodial time. The threshold to get the full enhanced child tax credits on a joint return is $150,000, and a couple that is still married could choose to continue to "Married filing Jointly" and retain the full child tax credit.

A parent who files as "Single" will qualify for the child tax credit if that person's income is under $75,000.

Divorcing Couples Should Arrange for a Dependency Exemption

If a couple is getting a divorce or is separated, they should not hesitate to negotiate a special arrangement for the dependency exemption for 2021 and 2022. The pending Build Back Better legislation will likely continue this enhanced child tax credit only through 2022. The prospect of an indefinite change in the tax law seems dim.

Many parents are wise enough to look at the shifting dependency exemption and the benefit of the child tax credit without resorting to litigation. However, a couple in litigation might speculate that the child support award may change if one parent gets the enhanced tax credit.

Realistically the change in child support is likely modest. However, it would be wise for the couple to look at this excess income as funds to benefit the child or children. Many families have child care, summer camp, or other extra expenses for each child. During tough economic times, having this money to ease the burden on both parents should offset the sacrifice of forfeiting a dependency exemption for a year or two.

Talk to a Family Law Attorney About Your Child Tax Credit

Let's face it. Tax laws can be confusing. But you can make sure you get the best credit possible by speaking with a family law attorney in our Bucks County law offices. They'll offer appropriate guidance on how you can best benefit from this unique opportunity to reduce taxes and enjoy the extra cash from Uncle Sam.

Our law firm has offices at 116 East Court Street in Doylestown. In addition, we have other locations in Norristown, PA and Cherry Hill, NJ. Our lawyers and attorneys offer legal advice on a variety of legal services. Call today.

How to Choose the Best Lawyer

Having to hire a lawyer may not be one of your favorite things to do. After all, who wants to confront a legal issue? But the reality is that at some point, you’ll likely require the services of a good attorney for a real estate transaction, a family law issue, workers comp, or even a personal injury case. So, the question becomes – how to choose the best lawyer near you?

Selecting the best lawyer or the best law firm, for that matter, can make all the difference between winning and losing your case. At the end of last year, more than 1.3 million licensed attorneys practiced in the United States. However, you might be surprised to know that there are only four lawyers for every 1,000 residents in the country. By the way, lawyers in Pennsylvania accounted for 50,112 of those numbers, or just under 4% of those nationwide.

How much do lawyers cost?

Law firms typically charge $300 on average countrywide from an hourly rate perspective. Pennsylvania lawyers fall slightly below that national average at $284 per hour. Some practice areas demand even higher rates, notably bankruptcy, corporate law, employment law, immigration law, IP law, taxes, and estates.

So, let’s get to it. How do you go about choosing the best lawyer?

Do Your Research to Choose the Best Lawyer

Most people don't hire a lawyer or law firm impulsively. Instead, most (78%) take a day, if not more, to make their decision. When conducting research, 98% of potential clients turn to online reviews, notably Yelp (69%) and Google (90%), to support their decision, according to a study by iLawyerMarketing. And 89% of people indicate a law firm must have a 4-star or better rating to be considered.

Apart from online resources, you can also talk with friends, neighbors, and business associates for recommendations. Do your best to find a client from the law office you’re considering. They’ll have the best insights into how the firm performs. State bar association can also prove valuable for finding lawyers practicing in the field where you require assistance.

Make Sure The Attorney Practices in Your Required Area

Not all lawyers are created equal. Most lawyers specialize in family law, litigation, employment, personal injury, civil rights, etc. So, limit your search to lawyers versed in your specific legal need. For example, if you're considering divorce, you'll want to focus your efforts on finding a divorce lawyer near you.

Many lawyers elect to provide general practice services in a smaller community. That may be fine for simple legal matters. But if your case has degrees of difficulty, you'll want to reach out to a focused lawyer near you.

For that reason, you might also want to reach out to a more prominent, local firm. Larger law firms may be more expensive, but they’ll also at times be more established, have more significant resources, and have a larger pool of legal services from which to draw.

When Choosing the Best Lawyer, Look at Their Experience

Having a specialized practice gives an attorney an advantage over one without that area of expertise. So does experience. Ask the lawyer you're considering if they've handled cases similar to yours.?

A lawyer fresh out of law school may be competent and excited to take on your case. But a lawyer with a long-standing practice has years of practice, plus experience within a courtroom. As a result, they may be more qualified to deliver expert advice regarding the risks of taking specific legal measures. What’s the difference between a lawyer and an attorney? We’re glad you asked.

norristown muncipal complex in montgomery county pennsylvania | How to choose a lawyer near you
How to choose the best lawyer? Most important is finding one that can practice where your case is located.

Talk to a Lawyer Near You

Because laws vary by state, you’ll want to retain a lawyer who is conversant in your state’s laws. They should also be a member of the state bar. Moreover, state law and requirements for a State Bar govern most law practice areas.

Equally important, if you have a more considerable legal concern or require longer-term counsel, it's best to find a lawyer near you to develop trust and a face-to-face relationship. The pandemic has greatly expanded communication options, with video-conferencing becoming an accepted means of interacting. But video-conferencing doesn't replace the personal touch, especially when embroiled in a complex legal battle.

Local attorneys will also have more substantial insights into the local court systems in choosing the best lawyer. Having interacted with prosecutors, other local lawyers, and judges daily, they'll offer more effective counsel than someone outside your area.

In addition to proximity, you'll want to make sure the lawyer's caseload isn't so large that it deflects them from handling your case.

Can You Afford the Lawyer?

As mentioned, legal fees average $300 an hour. They’ll vary by practice area and even the complexity of the case. So ask yourself if you can afford to pay your attorney or law firm.

If your case is simple with fewer intricacies, you might consider contacting a less experienced, more affordable lawyer. That said, the complexity of your case should weigh heavily in your decision on how to choose the best lawyer. Paying more for the best lawyer may save you in the long run.

When discussing costs, make sure you understand how your lawyer charges for services. Standard fee arrangements include:

Consultation Fee: Some law offices forgo consultation fees or give you a fixed amount of time for an initial consultation. Your lawyer may charge based on a fixed price or hourly fee.

Contingency Fee: With a contingency fee, if the lawyer fails to win your case, you will not pay a fee but will have to pay their expenses. The attorney's cost comes from a percentage of the amount awarded. Although contingency fees vary, one-third is most common. Contingency fees typically apply to personal injury cases, property damage cases, and other high award cases.

Flat Fee: Your lawyer will charge one total fee. Flat fees generally apply to more minor cases or ordinary services like will creation or an uncontested divorce.

Hourly Rate: You'll be charged based on the hours invested by the lawyer. An hourly rate represents the most common fee arrangement, and, as mentioned, rates may vary based on the legal area.

Referral Fee: If a lawyer refers you to another lawyer, they may request a referral fee. Some states prohibit may prohibit referral fees under state codes. Pennsylvania allows referral fees.

Retainer Fee: The lawyer receives a set fee that effectively serves as a down payment against future costs with a retainer fee. If your lawyer requests a retainer, make sure you understand precisely what that retainer entails.

Statutory Fee: In this case, statutes or courts determine the fee paid. Statutory fees are often associated with probate, bankruptcy, and other legal proceedings.

Whatever the proposed fee structure, make sure you’re fully aware of the potential costs.

Do You Like the Lawyer?

All other criteria aside, one of the most critical concerns in choosing the best lawyer for your case is whether or not you like them. If your issue is complex, you'll be spending a great deal of time with them. So, you better make sure you can get along with them.

With more emotional cases like family law that involve divorce, child custody, or child support, you'll want to have open communications with your lawyer. More important, you'll want to get a sense of empathy and commitment to yourself. You'll be opening up personal information and need to have your lawyer listen and care about you and your concerns.

Looking to Choose the Best Lawyer? Then Talk to Us!

Talk to us if you're looking for lawyers near you in Bucks County, PA. We have offices at 116 East Court Street in Doylestown. In addition, we have law offices in Norristown, PA, and Cherry Hill, NJ.

As a local law firm, we offer a vast array of legal services with a staff of 24 experienced lawyers and attorneys capable of meeting all your legal needs. Plus, respected resources like U.S. News annually cite our firm for its excellence:

High Swartz is a highly respected, highly successful law firm that’s nearby and ready to support you with all your legal requirements. Let’s talk.