To claim a child as a dependent, a non-custodial parent must attach Form 8332, Release of Claim to Exemption for Child of Divorced or Separated Parents, to his or her tax return. Failing that, a substitute for the form must be attached. The IRS says the substitute can be a decree or agreement that states all three of the following:
· The non-custodial parent can claim the child as a dependent without regard to any condition, such as payment of support.
· The other parent will not claim the child as a dependent.
· The years for which the claim is released.
If the decree or agreement has a condition, it cannot be used as a substitute for Form 8332. In William N. Ward v. Commissioner, a separation agreement provided the father could claim the dependency exemptions for his two children “so long as [petitioner] is current in the payment of his child support obligations.” The father was current, but the mother claimed the children as dependents on her 2004 tax return. The taxpayer also claimed them as dependents on his 2004 return and attached a copy of the separation agreement to the return.
Because of the stipulation that the father be current on his child support obligation, and because there was no statement that the mother would not claim the children as dependents, the IRS claimed that the separation agreement does not meet the criteria to be a substitution for Form 8332. The court agreed. Tax Court Memo 2008-54
But that’s not the end of the story. What was the father’s solution? In this case, the father instituted legal proceedings in Juvenile and Domestic Relations District Court to enforce the terms of the separation agreement. The mother was required to pay the father $2,426, the resulting tax effect of claiming the children as dependents. This court noted any future problems the father may have with the mother in this regard would be more adequately and effectively remedied in the courts.
Remember, you can be first out of the gate by claiming the kids, but the finish line is determined by the IRS and you willingness to fight.
· The non-custodial parent can claim the child as a dependent without regard to any condition, such as payment of support.
· The other parent will not claim the child as a dependent.
· The years for which the claim is released.
If the decree or agreement has a condition, it cannot be used as a substitute for Form 8332. In William N. Ward v. Commissioner, a separation agreement provided the father could claim the dependency exemptions for his two children “so long as [petitioner] is current in the payment of his child support obligations.” The father was current, but the mother claimed the children as dependents on her 2004 tax return. The taxpayer also claimed them as dependents on his 2004 return and attached a copy of the separation agreement to the return.
Because of the stipulation that the father be current on his child support obligation, and because there was no statement that the mother would not claim the children as dependents, the IRS claimed that the separation agreement does not meet the criteria to be a substitution for Form 8332. The court agreed. Tax Court Memo 2008-54
But that’s not the end of the story. What was the father’s solution? In this case, the father instituted legal proceedings in Juvenile and Domestic Relations District Court to enforce the terms of the separation agreement. The mother was required to pay the father $2,426, the resulting tax effect of claiming the children as dependents. This court noted any future problems the father may have with the mother in this regard would be more adequately and effectively remedied in the courts.
Remember, you can be first out of the gate by claiming the kids, but the finish line is determined by the IRS and you willingness to fight.
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