Discussion:Divorced Parents and Form 8332
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Discussion Forum Index --> Advanced Tax Questions --> Divorced Parents and Form 8332
Discussion Forum Index --> Tax Questions --> Divorced Parents and Form 8332
| 21 February 2008 | |
| Client is divorced and has custody of both children. Divorce decree states that ex-spouse gets the exemption for one of the two children and client needs to execute a Form 8332 signing over exemption and child tax credit. The kicker: ex-spouse's modified AGI is over the threshold and therefore, the child tax credit becomes zero on ex-spouse's return. If client deducts both children, the maximum child tax credit is allowed.
Client is attempting to contact ex-spouse to work out an equitable arrangement (albeit unlikely). However, while not authority, a proposed Treasury Regulation 1.152-4 might resolve this in favor of the client. Unfortunately, it's still proposed. Is it possible that client can ignore the divorce decree and claim both children in order to get the child tax credit? If push came to shove, the tie-breaker rules favor the client about 60-40. Any thoughts? Tom | |
| 21 February 2008 | |
| See CCA 200007031. Don't believe that you can ignore the divorce decree until the proposed regs are finalized, or if sooner, when both spouses agree to modify the original release. | |
| 21 February 2008 | |
| So why do other ex-spouses seem to ignore the divorce decrees on an ad-hoc basis? I have two that did already this year by filing first claiming kids they didn't support. I know, I know, this fits into the life isn't fair department.
However, didn't the Tax Court in Miller: 114 TC 184 (2000) uphold that the exemption to a noncustodial parent isn't valid unless it conforms to the substance of Form 8332. So if my client has the tie-breaker rules in their favor, are they really required to execute the Form 8332 even if it is vaguely referred to in the divorce decree? Tom | |
| 21 February 2008 | |
| I'm not a lawyer but wouldn't you (or rather your client) be in contempt of court? I agree that recent changes with the IRS rules in this area make it so that you could probably win the exemption but then you could be taken back to court becuase you broke the divorce decree. Does not sound like a great idea to me. | |
| 21 February 2008 | |
| Forget the tie-breaker rules - they don't apply. Federal law is clear - the custodial parent is entitled to the exemption UNLESS the custodial parent waives the exemption via a properly completed Form 8332 or its EQUIVALENT. Most divorce decrees do not contain all the required information and thus are not the equivalent of Form 8332.
IRS language in publications has not always been stellar in this area. The propose regs would make it crystal clear. But in the interim, the Tax Court has ruled consistently that state orders in a decree can NOT overrule federal law. From Miller (not the typo Millet) comes this snip. This Court consistently has held that section 152(e)(2) CLEARLY and unambiguously requires the custodial parent to sign a written declaration releasing the dependency exemption for his or her child to the noncustodial parent. See Neal v. Commissioner, T.C. Memo. 1999-97 ; Paulson v. Commissioner, T.C. Memo. 1996-560 ;White v. Commissioner, T.C. Memo. 1996-438; Peck v. Commissioner, T.C. Memo. 1996-33. On several occasions we have rejected well- intentioned but flawed attempts to comply with section 152(e)(2). See Neal v. Commissioner, supra; Paulson v. Commissioner, supra; White v. Commissioner, supra; Peck v. Commissioner, supra. EVEN WHERE a State court judge has entered an order “granting” the noncustodial parent the right to claim the Federal dependency exemption for his child and the noncustodial parent attached a copy of the order to his tax return, we have rejected the noncustodial parent's claim to the dependency exemption where the custodial parent failed to sign a written declaration as required by section 152(e). See Neal v. Commissioner, supra. | |
| 21 February 2008 | |
| Our posts crossed NYEA. I fixed the typo. And you are correct, the tie-breaker rules aren't applicable. I was looking for angles until I re-read a couple of cases, Miller and Chamberlain.
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| 21 February 2008 | |
| Well, as for divorce decrees, I have witnessed tax preparers and attorneys ignor them regularly as to filing status. Texas is a community property state, decrees would say that federal filings would comply, each spouse would share information to file 50% of each's community income, etc. It was never done in my experience. During the divorce wars that went on Attorneys use to tell me they had to pick there battles, and the spouses would just decide to file separately. Problem there was that us CPAs were signing these returns, however I never had one come back on me, doubt that there was much monetary difference. Actually had one Attorney laugh in my face because I was concerned about following tax law. Question - Why are these 8332 rules so sacred? | |
| 21 February 2008 | |
| Had to educate my own divorce attorney on the Miller ruling. Federal law supersedes all state law in this matter. Divorce decree stipulations not withstanding without a properly executed Form 8332 the non-custodial parent may not take a child as a dependant on his or her taxes. This has been clarified by the Chamberlain and Curello rulings. Without the Form 8332 the exemption and child tax credit can and has actually been disallowed resulting in tax liability without recourse. | |
Taxestaxes (talk|edits) said: | 21 February 2008 |
| You would think lawyers would learn this in a class or continuing ed course, something! | |
| 21 February 2008 | |
| Interestingly enough, I know one state that doesn't require continuing ed for lawyers. When I educated a lawyer buddy of mine about LLC's, I had a good laugh.
Tom | |
| 18 March 2008 | |
| Okay, after telling me this was "not his year" to claim daughter and hurrying up to finish his return so he could apply for financial aid, he emails me this morning stating that I had forgotten to add his child. Apparently, this is stated in divorce decree and we did take her two years ago. Unfortunately, I never thought about the 8332, but haven't heard anything. No debate that 8332 is absolutely necessary, correct? | |
| 18 March 2008 | |
| I am the custodial parent of my two daughters, and the divorce decree says we are to split them for tax purposes. I don't remember signing a Form 8332 to include future years, and know I have not signed one in the last 2-3 years, but being the fair guy that I am just hadn't been claiming more than one. My ex, on the other hand, having always felt that rules were for everyone else has mistakenly claimed the one that I am claiming a time or two (even though she meets none of the support tests).
I told that story just to say, the IRS came back to me, claiming that I now owed more tax for that year, because I claimed a dependent that had already been claimed somewhere else. It took a handful of phone calls and finally faxing them the entire divorce decree to talk them out of their position that I should file Form 8332 with my name as both the non-custodial parent claiming exemption and the signature allowing the exemption. Trying to explain to them that it did not make sense for me to sign a form over to myself wasn't as easy as I expected. | |
