DIVORCE DECREE IGNORED
Tax Court Agrees with IRS –
Internal Revenue Code Overrides Divorce Decree
Divorcees Need Both Legal AND Tax Advice
The divorce decree stipulates which of the divorced parents can claim the child. Some divorce settlements, with the objective of being fair, stipulate that the parents will alternate between tax years who can claim the child as a dependent.
In the case of Devin G. Seeliger, TC Memo 2017-175, the taxpayer (father) received an IRS notice of deficiency because the IRS found that he could not claim his daughter as his dependent. He was therefore not eligible to claim the child tax credit and could not file using the Head of Household status. The taxpayer disagreed with the IRS’s findings because his divorce decree clearly stipulated that he could claim his daughter in the odd years. The Tax Court found in favor of the IRS.
The facts of this case were that the minor child lived the majority of days with her mother. In accordance with the Internal Revenue Code (IRC), the minor child is a qualifying child of the mother only, regardless of what the divorce decree states. Accordingly, only the mother is the custodial parent and the only parent eligible to claim all child-related tax benefits. However, custodial parents can release their right to claim any qualifying child. The court found that the stipulation from the divorce decree does not give the father the ability to claim his child in the odd years, but rather it is a directive to the mother that requires her to release the right to claim her daughter in odd years.
The only mechanism that allows her to comply with such a stipulation is to provide the noncustodial parent with Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodian Parent (or a similar written statement). If the father requested the release and the mother refused to execute it, the mother would be in contempt of court. The court noted that although the mother would be found to be in contempt of court, it does not override the IRC requirements. In this case, the mother did not provide such a release nor did the father contact the mother and request that she release her dependency exemption. Accordingly, the father was denied claiming his child as a dependent and from claiming the child tax credit.
This case further highlighted the fact that even if the father was able to obtain a Form 8332 from his spouse, is would be ineligible to file using the Head of Household status because his daughter did not live with him for more than half a year.
TAX SAVINGS ALERT: When a couple decides to separate, be sure to consult with both a divorce attorney and a tax professional. While divorce attorneys often write divorce decrees that stipulate who gets to claim the child(ren) during a divorce, how many are familiar with IRS Form 8332? How many attorneys discuss that a child must reside with the non-custodial parent for more than 183 days to file as Head of Household?
If you would like to discuss your business or personal tax planning, tax preparation and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.
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About F. Bryan Haarlander, EA, CTRS:
Bryan Haarlander is an IRS licensed Enrolled Agent and who owns and operates a specialized tax services firm serving clients in the western suburbs of Philadelphia, PA, which includes the cities of Chester Springs, Coatesville, Collegeville, Devon, Downingtown, Exton, Frazer, King of Prussia, Paoli, Philadelphia, Phoenixville, Pottstown, Radnor, Reading, Wayne, West Chester in Berks, Chester, Delaware, Montgomery and Philadelphia Counties, as well as clients in Delaware, New Jersey, New York and throughout the continental USA.
A Certified Tax Resolution Specialist, Bryan is well-known for his IRS tax resolution expertise and his book How to Resolve Your IRS Tax Debt Problems.
