Submitted by Attorney Douglas C. Gardner
I was recently honored by an invitation to speak before a large group of local accountants and to discuss with them issues involving an overlap between their accounting and CPA practice and my legal practice as an Arizona divorce and family law attorney.
I had gathered several topics that I wanted to address with them, and was prepared to speak for my allotted time. As I delved into the issues I had prepared, the questions that surged from the audience quickly led me to the one issue that they most wanted to discuss, who gets to claim the children as dependency deductions and credits in Arizona.
The problem lies in the fact that tax law or IRS regulations are federal, and divorces in Arizona are governed by state law. Generally, when federal law covers an issue, it trumps or overrides conflicting state law. However, with regard to claiming children, the IRS law recognizes that in divorce cases the divorce court should have the discretion to divide the right to claim children. In fact, IRS provides for the general rule, which is that the parent with whom the children reside with for more than 50% of the time claims the children. The stated exception, however, is that a state divorce court can order this division to occur otherwise.
To accomplish this, the IRS requires a parent that is able to claim the children pursuant to a Court Order, but that does not have the children at least 50% of the time, to complete a Form 8322.
IRS has over the past few years tightened its regulations and no longer accepts court orders as evidence of who can claim the child, but strictly requires the form 8322.
The accountants wanted to know what they should do or advise the client to do when the wrong parent claimed the children or refused to sign the form 8322.
As IRS now strictly requires the Form 8322, the sole recourse is to return to Court and ask the Court to strictly enforce the prior orders regarding claiming the children.
Many clients have concerns with the costs of returning to court. Having done this many times, the best way is to narrowly draft the documents filed with the Court and try to limit it to a single prompt emergency hearing on this single issue. Sometimes, this can be handled with a single demand letter from an attorney and court can be altogether avoided.
Generally, the Court will not be at all pleased with a party who has willfully disobeyed a court order. The Court will often impose sanctions upon such a party, which may include payment of some or all of the attorneys fees involved.