Dependency Question

[JohnH]

Oddly enough, I don't deal with many situations in which the dependency exemption is at issue or changes. Until this year...

Couple divorced in 2002 and the written agreement says "Husband shall claim the minor child for tax deduction purposes, unless the parties agree otherwise." For every year since, she has been filing as single with no dependents and the husband (now remarried) has been claiming the exemption for the child. The child spends about the same amount of time with each parent. I don't prepare the husband's return, but I know his income is considerably higher than hers.

This year, the mother informs me out of the blue that the husband says she can claim the dependency exemption. I gave her an 8332, which the husband signed in Part I. and returned to me.

This is probably a simple question for most of you, but I'd just like to be sure the signed 8332 covers all the bases in this situation. Her income is in the $ 23K range, so this change nets her about $3,300 more between EIC, child tax credit, and Recovery Rebate Credit. I don't handle many EIC returns and I don't want to let something slip through the cracks.

[solomon]

When a custodial parent executes a 8332, the non-custodial parent is entitled to the dependency and child tax credit - that's it - no EIC.

[dkss]

non custodial or custodial?

Form 8332 releases the exemption to the non custodial parent. In your post you stated that the " The child spends about the same amount of time with each parent." The determination needs to be made - who is the custodial parent? In order to determine this, you need to know the number of nights the child lived with each person. If the child lived the most nights with dad, then dad is the custodial parent and fills out the f8332 and mom would not qualify for EIC. If child lived with mom the most nights, then dad does not fill out anything, the mom can claim exemption and eic.

[KBTS]

Check out the examples on page 3-16 of TTB for help on this. However, the signed 8332 would normally only allow your client to claim the child as a dependent and get the child tax credit (and RRC this year). HOH, EIC, and Dependent Care Credit are still based on which parent has over 50% custody. You may have to do a bit more digging on this to determine if your client actually had custody for over 1/2 the year.

[JohnH]

Wow!
Thanks for all that valuable input everyone

I sure am glad I've resisted giving out any estimates of the refund amount to the client yet. I think I'm going to give them a written statement to fill out declaring who has over 50% custody and have both sign it as well.

[Lion]

Custodial

If the mother is custodial parent, amend her open years to include HOH, EIC, child care credit.