Options?

[RayT]

A married couple files MFJ. They have 3 minor children from a previous marriage living with them full-time, year-round. They receive child support from the previous spouse in an amount that is less than 50% of total support costs. The 3 children are claimed by the previous spouse in accordance with divorce decree. What options, if any, does the couple have to claim additional deductions for their support (more than 50%) of the children? All comments appreciated.

[Gary2]

I'm assuming that all the usual tests for qualifying children have been met - citizenship/residency, relationships, etc.

So, first the available benefits: The custodial parents can claim the dependent care credit, if they pay it and otherwise qualified. Similarly, they can use DCBs. They can also treat the children as qualifying children for EITC purposes, again if they qualify. And for the purpose of medical expenses, they can treat them as dependents.

Second, you're looking at the support issues the wrong way. For children under 19 (or full time students under 24), the primary question is whether the child is self-supporting. If not, then it doesn't matter whether it's the custodial parents, non-custodial parents, or Great Aunt Agatha who lives across the country who provides the support; the support test for qualifying child has been met. Second, in order for the non-custodial parent to claim the dependency exemption, regardless of what the divorce decree says, it's necessary that between the custodial and non-custodial parents, they provide more than half the support. It doesn't matter how that support is split between them. But if Aunt Agatha is supporting the kids without living with them, while the custodial parents are earning enough to have to file their own return, then only the custodial parents can claim the kids as dependents.

Finally, please don't use the word "Options" as a thread title unless you're asking about stock options or similar investments.

[DonPriebe]

[Agree with Gary2. He posted while I was typing.]

The parent in the MFJ couple is the de facto custodial parent of the children. Assuming that he/she signs a Form 8332 to allow the non-custodial parent to claim the dependency of the children in accordance with the divorce decree, then the MFJ couple cannot claim either the dependancy or the child tax credit for the children. They may claim the Earned Income Credit and/or the Child Care Tax Credit if they otherwise qualify.

The fact that the MFJ couple provide more support of the children than the non-custodial ex-spouse does is irrelevant. The only support requirement on the Form 8332 is that both of the parents together contribute over 50% of the support.

[taxea]

the non custodial parent probably wouldn't sign and give up her claim to take the children on her return. Saying that I believe that if the custodial parent could prove more than 50% then the children can be claimed...the documentation must be in detail and provable.

[OtisMozzetti]

What I would want to figure out is whether the IRS still accepts the divorce decree in this instance, or whether it now depends upon having a signed IRS form release of dependent exemption to non-custodial parent for each child. If it does depend upon having the form, keep in mind that the non-custodial parent named in the divorce decree might threaten or take legal action to compel the custodial parent to provide the IRS form.

[Gary2]

I interpreted the original question as "what's left to the custodial parent", not "how can I get around the divorce agreement."

Even though there are cases in which the IRS, acting under current federal law, would ignore the divorce decree, I don't believe it's either ethical or appropriate to advise clients to exploit such rules if doing so would be in violation of the decree (unless the ex-spouse consents).

A trickier ethical question is whether one may sign a return, as a paid preparer, knowing that a dependent is being claimed in a way that's perfectly fine with regard to the IRC but in violation of a divorce decree, where the taxpayer either doesn't care about the ex bringing the case back into divorce court or doesn't believe the ex has the wherewithal to do so.

[Jesse]

I agree with Gary2 and thought his first post in response was correct and to the point.

For filing the tax return, there is nothing the non-custodial parent would sign to give up her claim to take the children on her return, but she could opt not to claim them for whatever reason. It would be direct opposite, the custodial parent would need to sign the Form 8332 or similar statement to give to the non-custodial parent to attach to her tax return in order for her to claim the children.

Even if the custodial parent can prove on all accounts that they are entitled to claim the children with respect to IRS rules & regs there could be major consequences outside the tax return for violation of the court document being the divorce decree.