The second biggest topic in most divorce cases is child custody and dependent exemptions. Effective 1 Jan 2009, new rules kicked in regarding the necessary documentation for claiming the dependent exemption for a child of divorced or separated parents. Before this date a copy of the judicial decree was sufficient, however, due to the varying nature and ambiguous wording of the different jurisdictions, this was determined to be inadequate. (§ Cod. Sec. 152)
The Form 8332 (Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent), or a facsimile with all the same information, is now required to be signed by the custodial/domiciliary parent for the other parent to claim the child. This form can be used for a single tax year or for numerous tax years. (See Sample in Appendix) The release of exemption must be unconditional. If the release of the exemption is predicated on the satisfaction by the non-custodial parent of any court ordered obligations then the release is invalid.
It is also the form used to revoke the release of the exemption, however, the revocation does not take effect until the tax year following the year in which the revocation is submitted. This prevents disgruntled parents from going back and trying to retroactively take back an exemption they earlier released.
It is important to remember that the release of the dependent exemption does not disqualify the custodial parent from being able to claim Head of Household filing status, dependent care credit or the Earned Income Credit. These are all qualified for on their individual merits by the parent the child lived with for more then 50% of the year each year.
In the case of a child that alternates living with each parent equally it is very important that the parent keeps a good written record of time spent with each parent. The IRS standard for a “day” spent with the parent is usually where the child sleeps at night. Therefore, unless it is a Leap Year, it is impossible for the child to have spent the exact same amount of time with each parent. There are exceptions to this rule for parents working shifts, temporary absences, and nights the child stays with neither parent. (§ Cod. Sec. 152(e))
In the case where parents have no written agreement, no signed release, and they insist that the child lived equally with both parents (ie. unmarried parents living together) then tie-breaker rules come into play. The parent with the highest AGI is treated as the custodial parent. (§ Cod. Sec. 152(c)(4)(B))
Next up, Alimony!
Subscribe to TaxConnections Blog
Enter your email address to subscribe to this blog and receive notifications of new posts by email.