Legalese – Dependency Deductions

Ah April.  The end of cold weather, spring break, blooming flowers, free-flowing pollen, and taxes.  April 15^th is a day that shall live in infamy.  It is inevitable as death – it is tax day.  If you are like me, and most everyone else, you have either just finished or are finishing your taxes, cursing their existence, and/or trying desperately to reduce their impact.

One sure-fire way to reduce your tax liability is by claiming another person as a dependent.  [Note: I am not in any way, shape, or form a tax expert, and everything I say should be double checked with an accountant.]  Dependency claims come up a lot in divorces – who exactly will get to claim junior on his or her taxes after the divorce.

The general rule is that the primary physical custodian gets to claim the child on his or her taxes.  Since the IRS is a part of the federal government and is controlled by federal law and regulations, the county Superior Court Judge does not have the authority to order a change in the rules.  The parties can, however, agree to allow the non-custodial parent to claim the child as a deduction.  This is done when one parent gets more benefit, or as a negotiating tool, or sometimes simply out of a general sense of fairness.  Even if it is in the Court’s order, the non-custodial parent still has to fill out Form 8332, which is an IRS form that gives permission to the non-custodial parent.

Think about that – Form 8332.  Presumably, that means that there are at least 8331 other forms.  Picture me shaking my head.  More power to anyone who can wade through them all.

If Form 8332 is not filled out, and the custodial parent claims the child even though the Settlement Agreement says she will let the father claim him, there isn’t a thing the IRS will do about it.  However, since it is part of a Court Order, the Court that issued the Order can hold the person who didn’t obey in contempt, so it is enforceable, although not through the IRS.

Interestingly, in preparation for this article, I went to look up the precise IRS regulation or part of the tax code that makes all this so.  In so doing, I stumbled upon IRS Publication 504.  Believe it or not, the IRS website, www.irs.gov, is a fairly user friendly, handy-dandy website, and if you type a plain English search term in the box, you can get most questions answered.

Anyway, IRS Publication 504 outlines exemptions and deductions related to families.  Spouses, dependents, alimony, and children of divorced parents are all addressed with rules in 8 point font about when you can and cannot claim certain things/people for certain purposes on your taxes.  There are special rules for whether or not a parent works at night, when the child lives the same number of days with each parent, when the child is away at camp, when a child is emancipated in the first half of the year and the second half of the year, and whether or not December 31^st is considered part of the previous year or the first part of the next year.  This is hair-splitting city.

One thing that struck me especially was the whole section for a “kidnapped child.”  (Yes, I am quoting here.)  I can’t imagine anything more terrifying than having a kidnapped child.  I cannot even being to speculate what goes through your head if that happens.  Apparently, however, there are enough parents of kidnapped children that worried about what to do on their taxes that a whole section of regulations.  And yes, it does matter if your child was kidnapped in the first or second half of the year.  Can you imagine?  I’ll dispense with the editorial comments.  It speaks for itself.

This is an extreme example, but it does show that there is not only a rule, but a section of rules, likely with a three-part test, for nearly everything when it comes to taxes.  So if you have any questions at all, don’t ask me.  Ask a qualified accountant.

This article was written by a lawyer, but should not be considered legal advice in any way, shape, or form.  It is written for general (and generally vague) informational purposes only.  In order to properly evaluate your case, a lawyer must examine all the facts and circumstances that are particular and personal to your situation.  I have not done that here.

(This column original appeared in Monroe Local News in April 2015)