Family Law and Income Tax Deductions

I see two kind of cases involving the dependency deduction: where the custodial parent does not execute the waiver and where a non-custodial parent takes the deduction without any right to the deduction. I read the post, DEPENDENCY DEDUCTION GOES DOWN IN FLAMES: Tax Court Rules Noncustodial Parent Is Not Entitled to Dependency Deduction Because a Valid Form 8332 (or Equivalent) Wasn't Attached, from Family Law Taxation as dealing with the second type of case.

"In order for a taxpayer to be entitled to the dependency deduction, the taxpayer must satisfy rather explicit statutory requirements. In the case of a divorce or separation, this can be particularly difficult for the individual that does not have custody (referred to as the 'noncustodial parent') -- even if the individual was 'granted' the deduction as part of the divorce proceedings.

Dependency deduction for noncustodial parents: The noncustodial parent is not entitled to the dependency deduction unless the individual attaches a valid written declaration (IRS Form 8332 or its equivalent) to their Federal tax return for the year the deduction is claimed. In the event a written declaration relinquishes more than one year, then the original must be attached to the first claimed year and a copy attached to each subsequently claimed year. For a discussion of these rules -- see FAQ: Dependency Deduction.

In Chamberlain v. Commissioner, the U.S. Tax Court ruled that the former husband (taxpayer) was not entitled to the dependent deduction for one of his children because he didn't attach a valid IRS Form 8332 (Release of Claim to Exemption for Child of Divorced or Separated Parents) to his 2003 Federal tax return (the child credit was also denied because it is premised on being entitled to the dependent deduction for the child). The Tax Court concluded that the attachment of a Post-It note referencing the initial (1995) Form 8332 didn't satisfy the statutory requirement of attaching a valid written declaration.

For those filers who have a validly executed waiver, you must attach the waiver.

As for the Indiana cases where the custodial parent refuses to sign the waiver as ordered by the court, the non-custodial parent can file a contempt affidavit. I suggest contacting me or another lawyer to do this. Remember that if you win, then you get attorney fees.