Parents Must File IRS Form or Risk Losing Child Dependency Deduction
From the Family Law Taxation blog:
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.
The taxpayer's former wife executed a Form 8332 in which she relinquished the dependency deduction for one of their two children beginning in 1995 and for all future years. The taxpayer claimed that he attached the original Form 8332 to his 1995 return, but that a subsequent fire destroyed all of his copies. The IRS was unable to provide a copy because their 1995 tax return information had been destroyed (pursuant to IRS document destruction policies).
This result may seem harsh, but as the Court indicated, "Although we are sympathetic with [taxpayer's] plight, we are bound by the wording of the statute as enacted and accompanying regulations when consistent therewith."
Source: "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 to His Tax Return" published at the Family Law Taxation blog.
