Please Note: There have been some important changes to IRS policies for how to claim the dependency exemption since this Blog was first written over two years ago - please click here for the latest information.
TWA - March, 2012
The Tax Court rules that a noncustodial father is not entitled to claim the dependency exemption because the custodial-parent (mother) failed to complete Form 8332, releasing the exemption and dissolution judgment, which father attached to return, was not a sufficient alternative because it did not contain substantially same information as the form 8332 does.
This is a really common situation, where a parent wrongfully claims a child or children on their tax return despite the fact the other parent is entitled to it that year according to the terms of a Judgment or Order. It holds that despite the language of a Judgment, without Form 8332 signed and attached to the return, the IRS will not recognize the dependency deduction.
You still have your claims against the other parent for the financial damage this costs you in terms of the increase taxes, however, but now you have avoidable attorney fees or must waste your own valuable time enforcing your rights in taking her back to court.
Click here to download IRS Form 8332
Thomas v. Commissioner (1/19/10) TCM 2010-11, No. 17922-08 (Vasquez) 2010 WL 174107 illustrates the perils of not handling how you will get your spouse to cooperate long before April 15th.
When Arizona resident (F) was divorced from M in 6/94, their disso judgment awarded custody of their 3-year-old daughter (C) to M; F was awarded 30 days of visitation in summer, plus reasonable visitation in C's state of residence. F was also ordered to pay child support of $400/mo through AZ T/CT.
Disso judgment further provided that M would claim dependency exemption and child tax credit for tax year 1995 and succeeding odd-numbered years, while F would claim exemption and credit in even-numbered years if he was current in his child-support payments. M was required to execute necessary forms to permit F to claim exemption and credit, but only if F's child-support payments were not in arrears.
In 2006, F was not delinquent in his child-support payments for C, who lived with M in Ohio. On his 2006 federal income tax return, prepared by CPA, F claimed dependency exemption and child care credit, but CPA subsequently notified him that his return was rejected from electronic filing because someone else claimed dependency exemption. CPA then filed F's paper return, to which F attached copy of disso judgment, but not IRS Form 8332 exemption release. IRS sent deficiency notice to F, claiming that he was not entitled to claim either dependency exemption or child tax credit. F then petitioned U.S. Tax Court for relief, but TAX COURT RULES FOR IRS.
Tax Ct finds that (1) per IRC §152(e), F, as non-custodial parent, was not entitled to claim dependency exemption unless
(a) C received more than half of her support from M and F,
(b) M and F were divorced, separated, or living separate and apart for last 6 mos. of 2006,
(c) C was in custody of either M or F more than half of 2006, and
(d) M, as custodial parent, released dependency exemption and F attached Form 8332 release or a document conforming to its substance to his return; (2) F could meet conditions (a), (b), and (c), but not (d); (3) disso judgment did not qualify as conforming document because it lacked Social Security numbers for M and F, M's signature was not dated, and release of exemption was conditioned on F's being current with child-support payments; (4) F could not claim dependency exemption; and (5) F's being unable to claim dependency exemption meant that he was also ineligible to claim child tax credit. Tax Ct concludes that although it is sympathetic to F's predicament, it is bound by statutes and regs as written.
For more articles discussing the mechanics of 8332 Dependency Deductions, click here.
Author: Thurman W. Arnold III, C.F.L.S.