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FORM 8332 NOW MANDATORY TO CLAIM DEPENDENCY EXEMPTIONS

Form 8332 Must Be Submitted With Your Return
If A Noncustodial Parent Wishes to Receive the Dependency Exemption for a Child

There has been an important 2011 change in IRS policies with regard to the paperwork that is required in order for a non-custodial parent to claim and receive dependency exemptions relating to children.

IRC section 152(c) permits a custodial parent, where a minor child resides with that parent for more than half the year as the child's principal place of abode, to claim a Dependency Exemption. This exemption can be released to the other parent.

However, the Tax Court issued an opinion in late 2011 holding that a noncustodial parent was not entitled to a dependency exemption deduction or the Child Tax Credit for his minor child, where the divorce decree stipulated that the noncustodial parent (the father) would be entitled to take his son as a dependent if he kept current on his child support payments. (Defernez v. Comm. TCS 2011-87). The mother did not sign a Form 8332 or similar declaration stating that she would not claim the dependency exemption, and indeed claimed it despite the language in the judgment. Father was therefore denied the credit.

Similarly, the tax court ruled last year that a noncustodial taxpayer who attached a pre-2009 divorce decree to his return was insufficient to entitle him to a credit because the decree failed to contain the custodial parent's Social Security number or the years to which it applied. (Briscoe v. Comm. TCM 2011-165).

It used to be that a custodial parent could release his or her claim to the dependency exemption by signing Form 8332 or "a similar statement" to enable the noncustodial parent to claim the dependent - these are to be attached to the noncustodial parent's tax return.

The "similar statement" needed to provide at least the following information:

  • The name of the child
  • The name and social security number of the noncustodial parent claiming the exemption deduction
  • The social security number of the other parent
  • The signature of the custodial parent
  • The date of custodial parent's signature
  • The year(s) for which the claims are released

However, for divorce decrees (or similar orders) issued after 2008, the IRS will no longer accept a divorce decree in lieu of of Form 8332 or the qualifying statement.

For divorce decrees or orders issued before 2009, if the decree or a separation agreement went into effect after 1984 and before 2009, the noncustodial parent can attach certain pages from the decree or agreement instead of Form 8332, provided that these pages provide information that is substantially similar to 8332. However, to be eligible to do this, the divorce decree must state:

  • That the noncustodial parent can claim the child as a dependent without regard to any condition (i.e., such as the common language that the claiming parent must first be current on their support obligation)
  • That the other parent will not claim the child as a dependent; and
  • The years for which the claim is released

The noncustodial parent must attach all of the following pages from the decree or agreement:

  • A cover page (that includes the other parent's SSN)
  • The pages that included all the items described above
  • A signature page with the other parent's signature and the date of the agreement

This means that in every child support order from now on (and before as stated above), particularly where the Court utilizes the guideline formula (Xspouse, Dissomaster, etc.) and in doing makes assumptions about how the dependency claims will be distributed, that there must be additional order directing the custodial parent to sign Form 8332 - and parties will be very well served to have that form with them at the hearing so that they can ask the custodial parent to sign it then and there. Otherwise, a payor noncustodial parent may find that they were ordered to pay more effective support than they should have on the mistaken belief that they would be getting a tax savings, only to find that the IRS disallows it.

Here is Form 8332.

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