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Which Spouse Can Claim the Dependency Exemption(s)?
I have been divorced for two years, and me and my ex-wife have been constantly fighting over claiming the dependency exemptions for our children. Who is legally entitled to claim these dependency exemptions?
In most divorce cases, the parties reach an agreement as to which spouse can write off the children, and claim them as dependents. However, as we all know divorced spouses constantly break the terms of the PSA. A frequent post-judgment issue is which spouse is entitled to claim the dependents. In most PSA's it is agreed that the parties will alternate the legal right to claim the dependents. Moreover, in many cases the parties will split using the dependents. Nonetheless, it is not uncommon for a disgruntled ex-spouse to try to file his or her taxes first, and to use up all of the dependency exemptions. Thereafter, an unassuming spouse will then try to claim his or her exemptions. The IRS will ultimately flag this error and reject the tax return of the spouse who files second. The IRS are wizards and they don't miss a trick.
An interesting issue arises in this all too common scenario. Who is entitled to claim the dependents to the tax return. Even if the PSA specifies that a non-custodial parent can claim the dependents, under IRS law only the custodial parent is entitled to claim the dependency exemption. The IRS does not want to get itself embroiled into any family disputes as to who can claim the exemption. The IRS is too busy and obsessed into collecting money and they don't want to waste time getting embroiled in the middle of warring ex-spouses. Therefore, the IRS has enacted a bright line rule to deal with this tax issue. The IRS has enacted the following decision:
Treasury Decision 9408: The custodial parent is entitled to the dependency exemption for the child regardless of what the divorce decree or agreement states, unless the non-custodial parent attaches a signed waiver effective for that tax year. The release of claims for an exemption must be either on Form 8332, Release of Claim to Exemption for Child of Divorced or Separated Parents, or a written declaration for the sole purpose of releasing the claim that conforms to the substance of Form 8332. For purposes of this decision, where one or both parents have the right to physical custody for over one-half of the calendar year and the child is under the age of majority under state law, the parent with whom the child resides longer during the calendar year is the custodial parent. The child is deemed to reside with a parent using the counting-nights rule, where each night that a child (1) sleeps at the parent's residence, whether or not the parent is present, or (2) sleeps in the company of the parent when the child does not sleep at a parent's residence, such as when the parent and child are on vacation, is a night of residence for that particular parent. Where a parent works at night, a child resides with the parent based on greater number of days, not nights.<
In summary, the IRS recognizes that the custodial parent has the right to claim the dependency exemptions, even if the PSA and the judgment of divorce specifies otherwise. Thus, even if a disgruntled ex-spouse writes off the children, and this contravenes the terms of the judgment of divorce, the IRS will still recognize the legal right of the custodial parent to use the dependency exemption for the children.
In New Jersey, a separation agreement is any legal document signed by both spouses outlining the terms of the separation. Subjects resolved in a separation agreement can include child support, child custody, debt allocation and asset distribution. Notarizing the document ensures its validity, since there is no such case-type in New Jersey that provides for a "legal separation." Spouses wanting child support during the separation period, however, must file a claim with the New Jersey probation department.
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