Dependent challenge & Divorce decree.

[Strongsilence-CPA]

Good morning...ugh...mondays!  Raining in SoCal so I'm looking for snow after I get the answer.

TP is my client.  The Divorce Decree says he gets to claim one of their children every other year and says that the Spouse must provide F8332. The Spouse is the custodial parent for the year in question.  There is no dispute about that. However, the spouse refuses to provide Form 8332, Release of Dependent Exemption.

Spouse filed first so now the TP (my client) needs to file on paper to get the dependent exemption.  

The IRS will see the claim by two taxpayers for the same child.  What happens next? Will the IRS ask the TP to provide evidence?  What controls - the divorce decree or the IRS rules for qualifying children?

Thanks and Be Weirder.

[PhoebeRoberts · Accepted solution]

If they have a pre-2009 divorce decree, see Pub 501 for the rules. It may be possible to attach some of the pages of the decree to the 1040 and claim an exemption for the child.  I personally have never seen a decree that met the IRS requirements.

If they have a post-2008 divorce decree, your client may not file a return claiming the child without the signed 8332. The IRS does not care what the divorce decree says. Your client should file a return now (because it is already delinquent) that does not claim the child.

Your client can take the ex to court to compel them to sign the 8332 (and I'd be sure to get a signature specifying the future years, as well). At that point, your client can amend to claim the child. Your client's lawyer should be able to advise as to whether they'd have a claim for the additional legal fees and cost to amend.

For children who have attained the age of majority, there's a good argument to be made that the divorce decree is no longer controlling, that an 8332 isn't effective, and that the general IRS dependency rules are the only determinative factor.

[BobKamman]

I would file the paper return claiming the child and attach a statement (not that anyone at IRS will read it) that "Receipt of Form 8332 is Pending."  It has been a few years since I saw one of these, but the first time around when the same individual appeared on two returns, IRS just sent a letter to both of them saying "don't do that again."  Evidence of disallowance by IRS may be helpful or necessary in any state court proceeding. 

Good questions -- what's the date of the decree, and how old is the child?  

[sjrcpa]

Another question - What, if any, tax benefit is there to claiming the child as a dependent?

In other words - is it worth a fight?

[IRonMaN]

"In other words - is it worth a fight?"

It seems like a lot of people in these situations think it is worth it.  They both lose, but the attorneys win so at least someone walks away happy. 😁

[Strongsilence-CPA]

sjr

Those questions would guide me, but this client looks to be ready for a fight.

[Strongsilence-CPA]

Thank you very much Phoebe. Your answer is helpful.

This is a post 2008 divorce decree.  I'm going to talk my client in an hour.

[Strongsilence-CPA]

Bob,

Thank you very much.  The decree was signed in 2016.  The children are minors.

[BobKamman]

@IRonMaN "They both lose, but the attorneys win so at least someone walks away happy."

Where I come from, most of the divorces are done without a lawyer -- sometimes with the help of "document preparation" services who call themselves paralegals because, well, why not?  But this varies from state to state.  It's like the places where you need a lawyer to do a real-estate closing.  

But in many cases, the real losers are the children.  So let's mention them.  

[sjrcpa]

But can you calm your client down?

I remember one particularly vocal client ( a lawyer). The cost to him of not claiming the dependent was $90 between federal and state. He shut up.