TAX ASPECTS OF DIVORCE

In the cover article of the Summer 2017 issue of the National Association of Tax Professionals’ quarterly TAXPRO JOURNAL I discuss in detail “The Tax Aspects of Divorce”.

 

The article includes the following statements –

 

“The U.S. Tax Code trumps the divorce agreement when it comes to who is able to claim a child as a dependent on the tax return.”

 

And –

 

“A local judge cannot overturn federal tax law.”

 

A reader sent me the following email in response to the article -

 

“The Tax Aspects of Divorce was very informative.  I do have a question, however.  In NATP’s Taxpro Journal it’s Page 13, first column, first paragraph.  The US Tax Code will trump a divorce agreement has been the way I was educated, but I’m a little confused about the last sentence in that paragraph which says ‘A local judge cannot overturn federal tax law.’  My understanding has been that the noncustodial parent who has been awarded the dependency exemption of the child can file a civil lawsuit against the now custodial parent to regain the dependency exemption.  That was verified by NATP & attorneys in my office. 

 

I’d appreciate it if you could just clarify that for me.”

 

Here is my reply to my fellow tax pro –

 

“Glad you found my article informative.

 

In answer to your question –

 

A non-custodial parent cannot claim a dependency deduction for a child unless the custodial parent provides a signed Form 8332.  The IRS will no longer accept the appropriate pages of a signed divorce agreement or decree with the exact same language as the Form 8332 as an alternative to a signed Form 8332.

 

It is my understanding that no divorce agreement or decree, and no local court judge’s decision or instructions, can force the IRS to allow the non-custodial parent to be able to claim a dependency exemption without a signed Form 8332.  A civil lawsuit award cannot in itself grant a non-custodial parent the dependency exemption.  Only a signed Form 8332 can grant a non-custodial parent the dependency exemption.

 

It is again my understanding that if a divorce agreement or decree says the non-custodial parent is entitled to the exemption, but the custodial parent does not provide a signed Form 8332, the “injured” parent can turn to a local court for relief and the court can require the custodial parent to provide a signed Form 8332 and penalize the custodial parent financially or legally for not doing so, or require the custodial parent to pay to the non-custodial parent the equivalent of the tax savings – but the local court cannot instruct the IRS to allow the non-custodial parent to claim the dependency exemption without a signed Form 8332.  

 

In my article I state –

 

‘If the divorce decree clearly states that the non-custodial parent is entitled to the deduction, but the custodial parent refuses to sign the Form 8332, the non-custodial parent must go back to the Court and get it to order the custodial parent to sign the form.  When negotiating a divorce settlement that gives the dependency deduction to a non-custodial parent there should be specific terms that require the signing of Form 8332 and outline what will happen if the custodial parent refuses to do so- such as the withholding of alimony payments or child support, or some other penalty.’

 

If you have any documentation or reference that indicates a local court can force the IRS to allow a non-custodial parent to claim a dependency exemption without a signed Form 8332 please let me know.”

 

As an aside – FYI the original article I submitted to NATP included the following paragraph in the beginning –

 

“Do you remember L.A. LAW?  While you would want Arnie Becker as the divorce attorney, the divorce agreement should be reviewed by Stuart Markowitz before it is signed.  For a more contemporary cultural reference - you would want David Lee as the divorce attorney, but have the final agreement reviewed by Will Gardner.”

 

However, despite my protest, this paragraph was deleted from the final published article.

 

So fellow tax pros – am I right?  Any thoughts and comments?

 

TTFN