Divorce and Dependency issues

[Jesse]

What do you do when a client brings in a copy of a divorce decree that states Mom has 60% placement and Dad has 40% placement and Dad has right to claim 2 kids as long as current on child support?

If you were Mom’s preparer would you suggest she not sign the Form 8332 and take both children as the IRS will not abide by the divorce decree and she has the right to claim both children?

Do you tell Mom you should honor the divorce decree and if Dad is current on his child support you should sign the Form 8332 allowing him to claim both children?

If Mom and Dad agreed to each claim one child, would you tell Mom – don’t do it as you have primary placement and IRS says you have the right to claim both children?

I tell my clients that money is not everything and try to think about the kids first and foremost. The IRS will not abide by the divorce decree but it can be taken back to the court system and who wins – mostly the lawyers. I thought the compromise was a great solution, but Mom’s CPA didn’t agree.

[erchess]

In such cases

I tell my client to follow the Court's Decree or get a tax lawyer now and let that individual prepare and sign the return.

If I were the judge in the case you are writing about I would put your client (and you if you were in my jurisdiction) in jail indefinitely on Contempt of Court charges. I am talking about a minimum of 90 days. I don't know about your state but in NC and Federal Courts Contempt and the punishment for it are whatever the judge says they are.

[Jesse]

My client received notice from IRS regarding examination results and they denied a dependency exemption and Hof H status. This is the first notice client received and did not realize he was under examination.

We called ex thinking perhaps both took same child, she said she just signs where told (she was a former client and I do believe her, she just wants to know how much money she’s getting back), I'll have my CPA call your preparer. CPA called and sure enough, ex filed w/ both children as dependents because CPA has copy of original divorce decree and because contingent on being current w/ child support – IRS will not honor this decree. I talked to ex and asked if she really thought this was fair as they did agree to each take one child? "Of course not" was her reply, she'd talk to her CPA. $$$$ comes into play - CPA assures her she has every right to take both children so she will leave it at that. I do believe she would have been content with a reduced refund, however, now she’ll have to come up with the refund money she already spent and she’s not willing to do that!

My client’s ex remarried and there was a legal amendment to the divorce decree awarding “equal” placement because children were spending more time with my client and he and his ex have mutually agreed (verbally) to each take one child for tax purposes. So now we’ll have to pull out a calendar and try to reconstruct days in clients home, which he truly believes to be greater than 50% in his favor, but now to prove that. Any ideas as to what a person can do to verify were the child physically resided?

The children are 17 and 18, each have their own vehicles and go back and forth as they please. They have a Monday “switch” date from earlier days which if abided by gives my client 183 days which is > ½ the year, but again they do not necessarily abide by this.

It really upsets me that the CPA is directing the ex to take both children as the IRS dictates she will prevail.

[joanmcq]

Even the decree doesn't mean a **** thing; it can say 'primary placement' but if the kids are really with dad 1 more day than with mom, DAD gets to claim both, and mom can't without the 8332. What probably happened is that mom got audited and produced some kind of proof that she provided more than half the support and they lived with her more than half the year. Usually in these cases, the IRS first sends a notice saying a dependent was claimed by more than one person, and maybe you need to amend? If neither amends, then they are both audited. But maybe they just went after mom, and since she 'proved' now dad's return gets adjusted.

[erchess]

I guess I just don't understand

how a judicial decree is not binding on everyone concerned unless and until said decree is overturned by a higher court. The IRS is not a higher court but should be bound by what the courts say.

[outwest]

It's easy why...

divorce is in state court which has no jurisdiction over federal matters. Any more than a federal court has jurisdiction over state matters.

[abby]

side note

Was the older child 18 in the year in question?

My understanding is that custody in divorce decrees addresses minor children - after the child reaches majority, the usual dependency rules kick back in - even if support is still required.