August 9, 2018
I have a situation with the following facts:
Two unmarried individuals have child and they all live together. The mother filed single (2015 & 2016 tax years) and claimed child as a dependent. Mother did not attach Form 8332 to her 2015 & 2016 tax returns. The father is the custodial parent because he has a higher AGI. The father has not filed his 2015,2016 & 2017 tax returns. Father would like to file as Head of Household. Does the fact that all live together disallow the custodial parent to waive the dependency exemption and child tax credit? If not, can the mother amend her returns to attach Form 8332 to her 2015, 2016 tax returns? It appears that the proposed regs allow for attaching form 8332 to an amended return

My thoughts:
1. Sec. 152(e) allows the custodial parent to release a dependency exemption to a noncustodial spouse. However, I do not think that applies because both are custodial parents.
2. I think the mother would have to amend her 2015 & 2016 returns for the father to file as HOH, resulting in the mother filing as single. If the mother amends her returns, all tax benefits for the child would be allowed for the father and HOH status.
3. IRS Pub 17, Example 8, allows the person with the higher AGI to allow the other parent to claim a child as a qualifying child and all other child tax benefits when both parents are unmarried. In this situation, the father would have to file as single, as he has no dependent for HOH.
4. This needs an analysis of which taxpayer benefits the most from the child’s exemption and related child tax benefits and file it that way.
5. What are your thoughts?