Tax Brake with Robert G. Nath, Esq.
"Tax Rules on Children in Divorce - Sometimes confusing, sometimes harsh."
- Week of 9/02/02 -
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| Both concepts were recently illustrated in two cases decided by the United States Tax Court.
Department of Harsh: In one, Husband and Wife divorced. The decree said Husband had to pay child support. If he did, he got to claim Child on his return as a dependent, even though Child lived with Wife. Moreover, the divorce decree provided that Wife “shall” sign the necessary documentation to allow Husband to claim the exemption. Husband paid, but Wife refused to sign IRS form 8332. (This form grants the exemption to the non-custodial spouse if fully completed and signed.) The result? Husband lost, and correctly so, even though the result may seem harsh. The tax law provides that in a divorce, the custodial parent is presumed to furnish more than one-half support (therefore, entitled to the exemption) unless the custodial parent signs a declaration that he or she will not claim the child. The regulations require that the “declaration” be on a form prescribed by the IRS (Form 8332) OR on a statement that provides the essential information on that form. That required information includes the consenting spouse's signature. Husband said, “But, I have a court order!” Not enough, ruled the Tax Court. Without Wife's signature, the intent of the law to eliminate disputes over support would not work. “While we are sympathetic to [Husband's] plight, we note that [his] remedy lies with the Arizona divorce court,” it ruled. (That is, the state divorce court could enforce the signature requirement, if Husband so elected.) Department of Confusion: In the other case, the divorced parent lost the dependent claim but won the head of household status. His daughter lived with him, but father did not pay more than half her support. (Social Security paid a large sum.) So, no dependent exemption. But he won the head of household status because the household was the daughter's “principal place of abode” for “more than one-half” of the tax year. The Administration has proposed, and Congress is currently considering, substantial changes in some of these rules to eliminate the confusion in many rules that currently govern dependent exemptions and filing status where children are involved. |
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