Question about claiming dependents / change of circumstances

[AppreciateYourHelp]

What is the name of your state? Hawaii

My question is, can I claim both kids on my 2020 taxes, even though the decree says he can claim one? Or do I have to go back to court first to try to change the decree?

Background: My divorce was final May of 2010. We have two children, aged 12 and 15, and share physical and legal custody. The divorce decree stated that on taxes he claims one, I claim the other, and that's what we've been doing (even though claiming one doesn't help him because of some sort of property income he has through his trust fund or something, but it would help me).

The decree also said we would move toward 50/50 visitation, and at the most he never had them more than 32% of the time, years ago. For a calendar year now he has not had any overnights, and sees them only occasionally. His last overnight was late Feb., 2020.

So basically, he pays a little child support but is otherwise not involved. They live with me, I pay for their needs. I no longer try to even get him to help with bigger things like medical bills, because he refuses, though the decree says we are supposed to split such costs.

Trying to change the decree would will likely be costly and difficult because if the first experience was any indication he will fight hard, and his parents pay his legal bills. However, if I were to do this I would also petition for full custody to reflect the status quo, and attempt to recoup the expenses he refused to pay.

Thanks for any help.

 

[adjusterjack]

You can "agree" on lots of things without going back to court. It's when somebody starts a fight about it that you end up making lawyers happy.

If he would agree to give up the exemption you'll need him to sign a document doing so for that child for that year (or for that year and future years) and you'll have to attach it to your tax return.

IRS Form 8332 is for the custodial parent to give up the exemption. It'll give you some idea how to write up a document that does the reverse. I haven't found a form that would do that.

https://www.irs.gov/pub/irs-pdf/f8332.pdf

 

[quincy]

Only one thread is necessary, AppreciateYourHelp.

Here is a link to your other thread with the same tax question:

https://forum.freeadvice.com/threads/can-i-claim-both-dependents-circumstances-changed.660987/

 

[Taxing Matters]

What is the name of your state? Hawaii

My question is, can I claim both kids on my 2020 taxes, even though the decree says he can claim one?

First, some background on how this works for federal taxes. When parents are divorced and split the custody of the children between them, the parent with whom the kids spend the most nights during the year is defined as the custodial parent (CP) under the tax regulations. The other parent is the noncustodial parent (NCP). The tax code provides that the CP is the one entitled to claim the dependent exemption for the children (and certain other child tax benefits that go with the exemption). The only way the NCP may claim the exemption is if the CP signs a waiver agreeing not to claim the exemption and that releases the exemption to the NCP. IRS Form 8332 may be used for that waiver. The NCP must then attach that waiver to his/her return. Note that what the divorce decree or custody order says has absolutely no bearing on how federal law allocates the exemption and the IRS will not care what the decree/order says.

So, with that in mind, there are two parts to my answer to your question. First, as far as the IRS is concerned you certainly could take the exemption on your 2020 return despite what the decree says. If you take the exemption and don't give him a Form 8332 or similar waiver you get the exemption.

But the second part of my answer relates to the state court. While the IRS won't care that you violated the order by taking the exemption for both kids when the order says you may only claim one, the state court will very much care. And if your ex decides to make an issue of losing the exemption he can file with the court to compel you to provide him the Form 8332 and move to have you held in contempt and seek an order requiring you to pay his costs in bringing the enforcement action.

Or do I have to go back to court first to try to change the decree?

That's the much better way to go. If he truly doesn't get any benefit from the exemption and related benefits perhaps he'd be willing to join you in having the decree changed. That would make it much less expensive to do. Otherwise, you'd have to go through the process of a hearing to prove to the court that you are entitled to the change you are seeking.

I no longer try to even get him to help with bigger things like medical bills, because he refuses, though the decree says we are supposed to split such costs.

If he refuses to pay things that the decree says he must pay, then you can bring the enforcement action against him to compel him to do it and might get the court to order him to pay your fees to do it. See a family law attorney about that.

Trying to change the decree would will likely be costly and difficult because if the first experience was any indication he will fight hard, and his parents pay his legal bills. However, if I were to do this I would also petition for full custody to reflect the status quo, and attempt to recoup the expenses he refused to pay.

Certainly you want to weigh the costs and benefits of pursuing the change before going down that road.

If he would agree to give up the exemption you'll need him to sign a document doing so for that child for that year (or for that year and future years) and you'll have to attach it to your tax return.

That is absolutely wrong. The only person who needs a waiver and must attach it to his/her tax return is the NCP. The OP is the CP and doesn't need any kind of waiver signed by the ex to claim the exemptions for the children on her tax return, as I explained above. That's why the IRS has no form for the NCP to sign. The problem with that, however, is that it puts her in violation of the court order.

Moreover, some agreement between them outside the court order to change the decree might not hold up in court should the ex contest it later. That is why the only sure bet here is to get the decree modified.

 

[AppreciateYourHelp]

First, some background on how this works for federal taxes. When parents are divorced and split the custody of the children between them, the parent with whom the kids spend the most nights during the year is defined as the custodial parent (CP) under the tax regulations. The other parent is the noncustodial parent (NCP). The tax code provides that the CP is the one entitled to claim the dependent exemption for the children (and certain other child tax benefits that go with the exemption). The only way the NCP may claim the exemption is if the CP signs a waiver agreeing not to claim the exemption and that releases the exemption to the NCP. IRS Form 8332 may be used for that waiver. The NCP must then attach that waiver to his/her return. Note that what the divorce decree or custody order says has absolutely no bearing on how federal law allocates the exemption and the IRS will not care what the decree/order says.

So, with that in mind, there are two parts to my answer to your question. First, as far as the IRS is concerned you certainly could take the exemption on your 2020 return despite what the decree says. If you take the exemption and don't give him a Form 8332 or similar waiver you get the exemption.

But the second part of my answer relates to the state court. While the IRS won't care that you violated the order by taking the exemption for both kids when the order says you may only claim one, the state court will very much care. And if your ex decides to make an issue of losing the exemption he can file with the court to compel you to provide him the Form 8332 and move to have you held in contempt and seek an order requiring you to pay his costs in bringing the enforcement action.


That's the much better way to go. If he truly doesn't get any benefit from the exemption and related benefits perhaps he'd be willing to join you in having the decree changed. That would make it much less expensive to do. Otherwise, you'd have to go through the process of a hearing to prove to the court that you are entitled to the change you are seeking.



If he refuses to pay things that the decree says he must pay, then you can bring the enforcement action against him to compel him to do it and might get the court to order him to pay your fees to do it. See a family law attorney about that.



Certainly you want to weigh the costs and benefits of pursuing the change before going down that road.



That is absolutely wrong. The only person who needs a waiver and must attach it to his/her tax return is the NCP. The OP is the CP and doesn't need any kind of waiver signed by the ex to claim the exemptions for the children on her tax return, as I explained above. That's why the IRS has no form for the NCP to sign. The problem with that, however, is that it puts her in violation of the court order.

Moreover, some agreement between them outside the court order to change the decree might not hold up in court should the ex contest it later. That is why the only sure bet here is to get the decree modified.

Thank you so very much. Your thoughtful response cleared things up extremely well. I now understand where the IRS concerns end and the state's concerns begin, and what my choices are. It's always such a hard decision, whether to poke the bear, as it were.

I wonder if I could ask one more question.

Based on this description, one of my children would not qualify for this new tax credit in the American Rescue Plan at all, correct? Because they would be claimed as a dependent on his taxes but do NOT live with him at all. "For 2020 tax returns that you are filing this year, the child tax credit is worth $2,000 per kid under the age of 17 whom you claim as a dependent and who has a Social Security number. To qualify, the child must be related to you and generally live with you for at least six months during the year."

https://www.kiplinger.com/taxes/602389/families-get-a-3000-child-tax-credit-for-2021

 

[Taxing Matters]

Based on this description, one of my children would not qualify for this new tax credit in the American Rescue Plan at all, correct? Because they would be claimed as a dependent on his taxes but do NOT live with him at all. "For 2020 tax returns that you are filing this year, the child tax credit is worth $2,000 per kid under the age of 17 whom you claim as a dependent and who has a Social Security number. To qualify, the child must be related to you and generally live with you for at least six months during the year."

https://www.kiplinger.com/taxes/602389/families-get-a-3000-child-tax-credit-for-2021

That summary by Kiplinger is very brief and skips over some important details. The child tax credit (CTC) has been around for years, and for 2020 returns the rules are unchanged from what they were before. The changes for 2021 expand the amount of the credit, allows the credit for kids up to age 17 (for 2020 only kids up to age 16 qualify), allows the full credit to be refundable, and allows for advance payments of the credit. Those changes last for just one year, though some Democrats would like to make it permanent and expand it in later legislation.

But for both 2020 and 2021 the basic rule for determining which parent gets the credit is unchanged. The parent must be able to claim the kid as his/her dependent and the child must have lived with the parent for the greater part of the year except in the case where a NCP qualifies to take the dependent exemption under the special rule for divorced/separated parents, i.e. the NCP has a Form 8332 or similar waiver allowing him to claim the exemption. Under that exception, if your ex otherwise qualifies (doesn't have too much income, etc) he would get to take the CTC if he is eligible to claim the kid as a dependent because you gave him a Form 8332. So the credit doesn't get lost just because a NCP gets to claim the dependent exemption. It just shifts to the NCP.

 

[AppreciateYourHelp]

That summary by Kiplinger is very brief and skips over some important details. The child tax credit (CTC) has been around for years, and for 2020 returns the rules are unchanged from what they were before. The changes for 2021 expand the amount of the credit, allows the credit for kids up to age 17 (for 2020 only kids up to age 16 qualify), allows the full credit to be refundable, and allows for advance payments of the credit. Those changes last for just one year, though some Democrats would like to make it permanent and expand it in later legislation.

But for both 2020 and 2021 the basic rule for determining which parent gets the credit is unchanged. The parent must be able to claim the kid as his/her dependent and the child must have lived with the parent for the greater part of the year except in the case where a NCP qualifies to take the dependent exemption under the special rule for divorced/separated parents, i.e. the NCP has a Form 8332 or similar waiver allowing him to claim the exemption. Under that exception, if your ex otherwise qualifies (doesn't have too much income, etc) he would get to take the CTC if he is eligible to claim the kid as a dependent because you gave him a Form 8332. So the credit doesn't get lost just because a NCP gets to claim the dependent exemption. It just shifts to the NCP.

Wow. And by "because you gave him a Form 8332" you mean because he could compel me to give him one via the court, yes? This is all so upsetting. If he gets this credit either he is profiting off one of two basically estranged children or he is causing their tax benefit to be lost (because of whatever that is about that family trust income he gets from the rental property or whatever, which currently precludes him from benefitting from claiming a dependent). Maybe this all should have upset me more before, but between the stimulus checks and this increase, seeing it all go away from the kids on top of the medical bill stuff, it's just too much. I have until October to work this out in court if I go that route, if I file an extension, yes? Thanks again for all this insight!

 

[Taxing Matters]

Wow. And by "because you gave him a Form 8332" you mean because he could compel me to give him one via the court, yes?

The court has the power to compel you to comply with the decree by ordering you to give him the Form 8332 that he needs to claim the exemption that the decree gives him. If you don't obey the order, you get hit with contempt sanctions. Once he gets the exemption he's entitled to claim the benefits that go along with it, like the child tax credit, if he meets all the requirements for it. One of the things that will decrease or eliminate him getting that credit is if his income is too high.

This is all so upsetting. If he gets this credit either he is profiting off one of two basically estranged children or he is causing their tax benefit to be lost....

Whether he takes the exemption and the CTC or not doesn't affect the kids' taxes at all. They are still dependents whether you get to claim them or he does, and as a result their tax situation is the same either way. The only thing this affects is the tax benefits YOU get.

I have until October to work this out in court if I go that route, if I file an extension, yes?

You could file now, claim one exemption to comply with the court order, and if you succeed in getting the court to order a change that would affect the 2020 return, you could then amend the return to claim the exemption (and he'd have to amend his return to remove the exemption he claimed. So getting the decree changed in court by October isn't needed here; if it takes longer, you could still end up getting the exemption. Note, though, that in my experience courts tend not to go back further than the year the complaint is filed seeking the change. In other words, if you file the court complaint in 2021, the court may make the change for 2021 and future years, but may be unwilling to go back to years before 2021. You'd ask your family law attorney about the practice on that in your state.

 

[adjusterjack]

It's always such a hard decision, whether to poke the bear, as it were.

Considering what you just wrote in your other thread about your daughter's attempted suicide and the reaction of your ex to the CPS investigation, you can probably forget about any cooperation from your ex.

https://forum.freeadvice.com/threads/cps-documentation.660993/

 

[LdiJ]

You can "agree" on lots of things without going back to court. It's when somebody starts a fight about it that you end up making lawyers happy.

If he would agree to give up the exemption you'll need him to sign a document doing so for that child for that year (or for that year and future years) and you'll have to attach it to your tax return.

IRS Form 8332 is for the custodial parent to give up the exemption. It'll give you some idea how to write up a document that does the reverse. I haven't found a form that would do that.

https://www.irs.gov/pub/irs-pdf/f8332.pdf

That advice is incorrect Jack.

The only person who needs to sign Form 8332 giving up the exemption is the custodial parent (custodial parent by the IRS's definition, which is the OP). There is absolutely no reason to write up a "document" that does the reverse.

The IRS doesn't care squat about the court orders.

 

[AppreciateYourHelp]

Considering what you just wrote in your other thread about your daughter's attempted suicide and the reaction of your ex to the CPS investigation, you can probably forget about any cooperation from your ex.

https://forum.freeadvice.com/threads/cps-documentation.660993/

Yep. Sigh.

 

[AppreciateYourHelp]

The court has the power to compel you to comply with the decree by ordering you to give him the Form 8332 that he needs to claim the exemption that the decree gives him. If you don't obey the order, you get hit with contempt sanctions. Once he gets the exemption he's entitled to claim the benefits that go along with it, like the child tax credit, if he meets all the requirements for it. One of the things that will decrease or eliminate him getting that credit is if his income is too high.



Whether he takes the exemption and the CTC or not doesn't affect the kids' taxes at all. They are still dependents whether you get to claim them or he does, and as a result their tax situation is the same either way. The only thing this affects is the tax benefits YOU get.



You could file now, claim one exemption to comply with the court order, and if you succeed in getting the court to order a change that would affect the 2020 return, you could then amend the return to claim the exemption (and he'd have to amend his return to remove the exemption he claimed. So getting the decree changed in court by October isn't needed here; if it takes longer, you could still end up getting the exemption. Note, though, that in my experience courts tend not to go back further than the year the complaint is filed seeking the change. In other words, if you file the court complaint in 2021, the court may make the change for 2021 and future years, but may be unwilling to go back to years before 2021. You'd ask your family law attorney about the practice on that in your state.

Thank you. Good to know.