Form 8332 and Fairness

Dependent issues are the most complex issues that I deal with preparing taxes. Not only are you dealing with a complex set of rules but you are dealing with the perceived “fairness” of the rules and how they applied.

Feelings of “fairness” really come in to play when you are dealing with the exemption for children of divorced or separated parents. When looking at the right of two parents to claim the exemption for their child, the IRS doesn’t look at what’s on the divorce decree or custodial agreement. They look at the dependent rules of age, relationship, support, custody and other factors. The parent who meets the dependency requirements (custodial parent) gets to claim the child. That parent can choose not to claim the child but then no one else can claim them except the other parent. Even then, the IRS requires documentation that the custodial parent releases the exemption to the non-custodial parent. (For a discussion of parent vs. child and the dependent exeption, IRS Prevention.)

Here is where “fairness” comes into play. The right to claim the exemption for a specific child has been written in to most divorce decrees or custodial agreements. However, those papers might not work to give the non-custodial parent the exemption. If the document was prepared after July 2, 2008, it wouldn’t have worked. Even earlier court papers need to meet specific requirements to document the exemption for a non-custodial parent. If there was a contingency requirement, like being up to date with child support, the divorce/separation won’t work. If the document wasn’t signed by the parents, it won’t work for the IRS.

For a non-custodial parent to claim an exemption for their child, they need to have a completed Form 8332 which is sent to the IRS. If they don’t have that exact form, they have to provide a release with all the same information. A divorce decree or separation agreement issued before July 1, 2008, signed by both parents and having no contingencies will work. Otherwise, the form 8332 is required.

If the custodial parent won’t sign the form 8332, the non-custodial parent can’t claim the dependency exemption. If the non-custodial parent claims the exemption anyway, the IRS will take it away.

Look, the IRS doesn’t want to be stuck in the middle of a family fight. Congress has created very specific criteria for a child to be a dependent and given parents a way to share dependents. But you have to follow the rules.

Remember the “fairness” issue isn’t with the IRS since they are trying to administer the same rules to everyone but to the custodial parent not playing fair. Sitting at my desk and complaining won’t change what I can do or what the IRS will accept. We can all agree that it isn’t fair but rules are rules and the person to talk to is your attorney or the other parent.

McIntire Tax Center - on Facebook - on Google+ - or Twitter @ mactax.

Comments

[Arthur Rubin]

I am a tax preparer, not a lawyer, but I've heard that the Family Court can order the custodial parent to prepare the 8332 and send it to the Court and/or the non-custodial parent. In (at least) some states, the Court could bring contempt-of-court proceedings against the custodial parent if (s)he doesn't comply.

Yet another reason why an attorney should keep a tax preparer on call.

[Cindy Galford]

Excellent post Trish. I have lost clients because I refuse to claim the dependent exemption for the non-custodial parent with out the 8332. Like the IRS, I don't want to get in the middle of a family fight. Unfortunately, not all preparers play by the rules....

[Michael Cash, EA]

Even a court order finding the custodial parent in contempt for refusing to sign Form 8332 is not enough. See Clinton: T.C. Summary Opinion 2010-75

[GoranLojpur]

I wish all tax pros would follow this rule :)

[Anthony]

The IRS won't allow the deduction based on an unfollowed court order, but the court order would presumably put pressure on the person to follow it, and would presumably (but IANAL) be grounds for a lawsuit to recover for damages.

Attorneys and tax preparers certainly should keep a list of references of individuals they trust to do a good job. I don't know if lawyers are allowed to keep one particular individual on call, though, as that may get into ethical issues, especially for the lawyer.