31-Jan-2011

Written by: Eric Childs, Attorney

Divorce, Legal Separation and Child Custody are difficult issues to deal with, let alone determining how each parent will be claiming the children on their yearly taxes. One of the questions we often get asked at tax time is, “Who gets to claim the children on their taxes after a divorce, the custodial parent, or the non-custodial parent who is paying child support?” With tax issues, the answer is rarely easy. However, you have attorneys at Davis Miles who can discuss this with you. There are three important steps you should first consider before calling the attorney.

Generally, the first and most important step is to clearly identify what is set forth in the divorce, legal separation or child custody and visitation decree.  Though the Internal Revenue Service, and therefore the Arizona Department of Revenue, may not rely solely on the decree, this is very much an important step in their analysis of who they will allow to have the child tax credits, earned income credits and dependant exemptions.

The second important step is sticking to the schedule and therefore filing the proper forms.  The Internal Revenue Service prefers to allow the custodial parent to claim the children, and therefore gives the custodial parent the right to claim the child credit/exemption. If the custodial parent is not going to be the one to claim that credit and instead, the non-custodial parent will claim the credit, the custodial parent must sign the proper form to “release” the right to the non-custodial parent, Form 8332 Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent. This is essential for the non-custodial parent to claim the children, for without it the Internal Revenue Service may not allow the non-custodial parent to claim the credit and exemption for the children.

The third step, which is often misunderstood, is remaining current on all child support payments.  If the non-custodial parent is going to be the one to claim the credit/exemption for the children, then all support payments for the year that parent is claiming the children must be current and the above Form 8332 should be signed and the Internal Revenue Service should accept the filing.  Therefore, if there are arrearages or amounts due from prior years, or if the payments are merely delayed by other reasons, the non-custodial parent still may claim the children so long as the current year is paid.  This is a source of much contention and can cause problems, but remember that though the Internal Revenue Service usually sides with the custodial parent in these disagreements, they will consider all documentation in determining the right to claim the children.

As always, please feel free to call Davis Miles to discuss these questions with one of our attorneys.