I have a client who got a divorce in 2006. However, they lived apart all of 2006. My client had the kids more time than the other spouse, so 06 taxes were filed HOH and both children claimed on my clients return. Client gets a letter that the children where claimed on another return and she needs to justify her position. What she also tells me during that conversation is that the final PSA said that the former spouse (not my client) can claim the deduction for the children. My position at this point is to amend 06 and file single with no dependants. Any other suggestions, or am I on the right track. Thanks for the input.
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Check the eligibility for H of H, as she could still file this status without the children as dependents. Is she eligible for EIC, again claim EIC even though no dependents. -
File HOH with EIC
Taxtime, the IRS beat its chest and declared to the whole world it was going to publish a "uniform" definition of a child. What came out was a somewhat confusing verbiage and virtually NO challenge to overrule the decree of local judges. In your situation, all the "other" spouse has to do is furnish that section of the divorce degree and the dependents are his. The IRS will honor that decree unless other divorce conditions have been broken (such as child support or residency).
However, loss of dependency does not stop your client from filing Head of Household (not single), and claiming Earned Income Credit, so long as the other requirements are met. If your client gets EIC, it will probably be more valuable than the dependency award.Comment
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HOH and EIC
I agree that after the divorce, according to your listed facts, you should consider HOH with EIC and NO dependents for the years beginning with the year of the divorce.
However, BEFORE the divorce but while living apart more than the last six months of the year while still married with the kids in residence with her, I would think she'd qualify for HOH WITH dependents. Did she have a separation agreement or other contract covering the time they were still married, any year in which they were still married 31 December but living apart the last six months? Is she obligated to sign over the dependencies via Form 8332 for any calendar/tax years BEFORE the divorce was final? Don't be too quick to amend prior filed years until you review her situation then.
And, was it a letter notifying her that two people claimed her kids? Or, a letter asking for documentation that the children lived with her? Send in copies of school and medical records with her name and address as parent and any other items requested.Comment
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Agree
with Lion. If she's entitled, then she should stand her ground.
However, I hope she doesn't fall into the trap someone else did.
An unenrolled preparer's daughter's boyfriend claimed HOH with child for 2006. Yes,
custodial parent and physical custody applied. He got a letter from IRS dated May 21st
wanting proof. Allegedly proof in the form of EIC requirements, you know, school records,
proof of residency, etc were submitted, to Holtsville, however not certified male. AFter
all, HE had prepared his own return, and not signed by my friend the unenrolled preparer.
Time goes by, the 90 day letter dated August 21 arrives and nothing is done; after all,
proof had been sent and perhaps not acted upon in time, but it would be considered.
No word from IRS; no other contact by him. The preparers contacts me Tuesday and
needs help in filling out the tax court petition, since it was November 20th, and the
"three months" was almost up. Ah hah, you probably know where this is going.
three months is not 90 days.
Moral of the story. Taxpayers should have competent representation, or at least
understand that burden is on them to follow up with IRS>ChEAr$,
Harlan Lunsford, EA n LAComment
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Originally posted by Golden Rocket View Post
Rocket - I have to disagree with you. §152(e) gives the rules for divorced parents. The custodial parent ( currently defined in §152(e)(4) as the parent having custody for the greater portion of the year) gets to claim the dependents unless they release them via Form 8332 or its equivalent.
For purposes of claiming dependents, the words of the divorce decree are irrelevant. The Tax Court has consistently ruled on this and it often notes that the Court, while sympathetic to the non-custodial parent who was granted the dependency via the decree, cannot let state law overrule the law proscribed by Congress. It tells the affected taxpayer that they must go back to the state court to have the decree enforced. The seminal case for this position is Miller 114 TC No. 13.
The proposed new regulations will spell this out in PLAIN language but in the meantime the custodial parent gets the exemption in the absence of a properly executed release of the claim of the exemption.Comment
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NYEA I invite your attention to "Form 8332 or its equivalent." Apparently, the divorce decree qualifies to be an "equivalent." The context of allowing the divorce decree to prevail is found in Pub 504, Divorce Decree or Separation agreement made after 1984.Originally posted by New York Enrolled Agent View Post
For my part, I wish IRS would stop allowing the divorce decree to prevail, but utter carnage of paperwork would result. For example, if they ruled against local judges, then the custodial spouse would be enjoined by court ruling to submit 8332's to the other spouse, and a glut of amended returns would be filed, and none of the IRS objectives would be met.
For Lion and ChEAr$, I think your tax reasoning is correct to fight for the client's dependency exemption, however, this could be a Pyrrhic victory, risking more economic loss. For example, the negotiation of child support money is often predicated around being able to claim the dependent, and if any child support was paid, this could legitimize an offset. Another risk of filing an amended return is to invite more attention to the return which is not always good either.Comment
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Agree with NYEA
The custodial parent gets exemptions and H of H and child tax credit if under 17 unless the other spouse has an 8332 or the other spouse can provide a divorce decree that has all the info on the 8332. The one most likely not there is the SS number of the custodial parent. The custodial parent should write to IRS telling them this and have IRS get the docs from the non custodial parent. If the non custodial has a divorce decree with all the required info then the custodial only gets H of H and I think EIC.Comment
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From the 2007 Form 1040 instructions:
Page 17 says:a. The custodial parent signs Form 8332 or a substantially similar
statement that he or she will not claim the child as a
dependent for 2007, and the noncustodial parent attaches the
form or statement to his or her return. If the divorce decree or
separation agreement went into effect after 1984, the noncustodial
parent can attach certain pages from the decree or
agreement instead of Form 8332. See Post-1984 decree or
agreement on page 17.
My only comment would be, when in the history of divorce decrees have you ever seen one contain all of that?Post-1984 decree or agreement. The decree or agreement must
state all three of the following.
1. The noncustodial parent can claim the child as a dependent
without regard to any condition, such as payment of support.
2. The other parent will not claim the child as a dependent.
3. The years for which the claim is released.
The noncustodial parent must attach all of the following pages
from the decree or agreement.
• Cover page (include the other parent’s SSN on that page).
• The pages that include all the information identified in (1)
through (3) above.
• Signature page with the other parent’s signature and date of
agreement.
Use the 8332 and stop messing around thinking you can use a divorce decree.Last edited by Bees Knees; 11-23-2007, 08:42 AM.Comment
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Agreement
And I agree with NYEA (Noo Yawk Enrolled Agent), not because it's my opinion,
but because he is right. But to tell everything I know about why he is right
would consume too much bandwidth here.
(grin)ChEAr$,
Harlan Lunsford, EA n LAComment
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Thanks
For all the input.Comment
Comment