And another tax court case finds against a payor-parent who wanted to claim a child dependency exemption, because the other parent had not executed Form 8332. (A follow up to You Almost Can’t Win With the IRS, posted January 2013). This divorce judgment language stated that Father could claim all three children in any year during which his child support was current and that Mother was unemployed, even if the children resided more than half the year with Mother. Those two factors (unemployment and being current on child support) were not disputed by the parties.
Because it’s the Internal Revenue Code and not state law that governs one’s eligibility to claim dependency exemptions, however, that language was insufficient. The Decree’s language could not modify the IRC’s requirement that the “child must reside with the taxpayer more than half the year”, and only the execution of Form 8332 could qualify the “noncustodial” parent for the exemption. Father had done what he could in the family court—he had attempted to get an Order requiring Mother to execute the 8332 —– but was unable to get the form signed by April 15 of the year in which the 3-year statute of limitations ran on the tax year. Because the statute ran, if the dependency exemptions were transferred to Father, the IRS would be unable to assess Mother for the tax she would owe as the result of relinquishing the exemptions.
I continue to be amazed that individuals can afford to fight the tax dependency issue all the way to tax court (after presumably fighting it in state court), as the net effect of each exemption is not all that high. See the May post “Tax Court Cases Still Fighting the Dependency Exemption Battle“.
Shenk v. Commissioner, May 6, 2013.