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Discussion:Form 8332 for releasing exemption to non-custodial parent - do people actually send these in?

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Discussion Forum Index --> Tax Questions --> Form 8332 for releasing exemption to non-custodial parent - do people actually send these in?


WilsonCA (talk|edits) said:

5 March 2014
The CPA I used to work for never sent in a Form 8332 (as far as I know, and I would know) in the 6 years that I worked for him.

Now that I'm on my own, I have to wonder - am I just wasting time my time and my clients' time if I insist on sending these things in? The clients certainly never seem to have them ready beforehand, so they have to get in touch with their ex, and that's often... problematic.

(Assume we're just talking about post-2009 divorce agreements, where as far as I know there's no substitute allowed.)

Ckenefick (talk|edits) said:

5 March 2014
I don't know if I'd insist on it. But I do think the client should be advised as to what the law requires and the ramifications for what might happen if it isn't attached to the return (and the ex-spousey goes on and claims the kid). Even in most unamicable situations, the ex will know and understand that violating the divorce decree isn't a real smart thing to do...so the ex will not claim the child, your client will, and there won't be any duplicative dependents. And, in amicable cases, there is less to worry about.

Captcook (talk|edits) said:

5 March 2014
I always do (in both cases I work with). One is not amicable, which makes it important to do so.

Ckenefick (talk|edits) said:

5 March 2014
In these unamicable situations, you'd think that if the guy is a loose cannon, and is gonna haul off and improperly claim the dependent, he wouldn't bother signing the Release in the first place, unless he was forced to do it through the attorneys.

WilsonCA (talk|edits) said:

5 March 2014
Has anyone here ever had the IRS ask for a 8332?

[I can see how it would come up if both parents claimed the child. Otherwise... well, this just strikes me a yet another Exercise in Wasting Taxpayers' (and Tax Preparers') Time. Trying to settle a dispute where none exists.]

Captcook (talk|edits) said:

5 March 2014
Yes, in my amicable case, it was requested, which is why I insist upon it in the other.

Ckenefick (talk|edits) said:

5 March 2014
What were the circumstances?

Tonymontana (talk|edits) said:

5 March 2014
Yes! Have one now where the ex wants to claim the dependent.

My client is contemplating on letting her claim the child to help her out, but if she even blinks the wrong way he'll whip out the signed 8332 and deny her the privilege.

STG (talk|edits) said:

5 March 2014
Important to note that the 8332 is revocable and ALWAYS in control of the custodial parent (as defined by number of nights, not divorce decree.)

IRS doesn't give a hoot what the judge says, Number of nights and 8332 are controlling. That's why if the decree says non-custodial parent gets exemption, you still need an 8332 (post 2009). Failure to get an 8332 when divorce decree says you should is between taxpayers and judge, not the IRS.

The only reason the IRS accepted pre 2009 divorce decrees is because the custodial parents signature indicated willingness to give up the exemption, not because it was signed by the judge. Too much abuse of that so the IRS changed rules in 2009.

STG (talk|edits) said:

5 March 2014
Translation: I ALWAYS get and send 8332 post 2009. I also recommend that clients facing divorce and won't be custodial parent get 8332 signed for all applicable years at the signing of the divorce papers.

Kevinh5 (talk|edits) said:

5 March 2014
If the IRS rules state the form is required (they do), then the prior CPA is risking being accused by OPR of disreputable conduct by ignoring the rules. I'd hate to lose my license to practice because of ignoring the rules for expediency sake.

EZTAX (talk|edits) said:

6 March 2014
Agree with Kevin here. I am always surprised folks are willing to disregard such obvious rules. We had a similar discussion regarding sending in the D details. Many don't bother. I always do.

Ckenefick (talk|edits) said:

6 March 2014
I don't know if I'd go so overboard with this issue. But at the same time, I don't know if I'd be so lax about it either, like Wilson's former employer.

In the real world, the IRS is only gonna have a problem with all of this, 99% of the time, when the dependent shows up on more than one return. The IRS has even stated, in a CCA, that they "can" consider an 8332 presented during examination. But that's just what they say. They might not be feeling like it that day. And if it goes to court, the judge might not care about that CCA.

Where I see the exposure is when the client can get it, but the preparer fails to ask for it, and for whatever reason, the exemption gets denied. Then the client will say, "Why didn't you tell me? It's your fault. I would have gotten it."

So, simply tell your client the rule and if they get it, great. If they don't want to or can't, then decide if you want to claim the dependency deduction. If you're comfortable that it's legit, like Wilson's former employer, then put the dependent down on the return.

Do note that the attachment requirement is statutory (and regulatory), which is why it really shouldn't be ignored. There's plenty of guidance of regulatory (only) attachment requirements that taxpayers intentionally violate to get the result they want. But then the judge says, "Those Regs don't matter, so you won't receive the benefit you sought."

Mscash (talk|edits) said:

7 March 2014
The issue comes up in Tax Court all the time and it's a no brainer. Non-custodial parent has a court order giving him or her the exemption but the custodial parent claims the exemption anyway. If you don't have a signed 8332, you don't have squat because IRS doesn't care and the Tax Court judge judge doesn't care what the divorce court judge says. Possession of the body trumps everything except a signed 8332. The most fun case to read on this is Clinton, T.C. Summary Opinion 2010-75 where the father got Court Order compelling mother to sign Form 8332. She refused and the court found mother in contempt of court. Since the mother never signed Form 8332 or a substantially equivalent document the father lost in Tax Court.

Kathyt (talk|edits) said:

7 March 2014
I always get it. Used to mail in but now just do a PDF attachment to the e-file return. Aside from the fact that it is required, it's common sense as well. Think about it, if getting in touch with the ex is problematic before the return is prepared, how much more problematic will it be to get in touch with the ex and have them sign the form AFTER the return is filed, especially if the custodial parent already claimed the child??

Ckenefick (talk|edits) said:

7 March 2014
I think you guys are missing the point Wilson's question.

Kevinh5 (talk|edits) said:

7 March 2014
Wilson's question was whether he can ignore the rules as the CPA for whom he worked so readily did. As MsCash's cites point out, not without peril. I would hope that Wilson's former CPA boss has good E&O insurance.

Ckenefick (talk|edits) said:

7 March 2014
Now that I'm on my own, I have to wonder - am I just wasting time my time and my clients' time if I insist on sending these things in?

No, this was his question.

What he really wants to know is if he spends time getting these things, or trying to get them, will it really change things. In other words, if he doesn't get them, whether or not he attempts to, will it really matter if the other spouse actually abides by the divorce decree and doesn't claim the kid in the first place. That is, will the exemption be kicked out even if there is not a duplication of the dependent.

Mscash is citing a case where there was a duplicative dependent. Nobody can stop a former spouse from violating the divorce decree. And, in that case, there was an outright refusal of the ex spouse to sign the waiver.

The dependency deduction is no different than other deduction. The rules require you to have documentation to support your deductions, be it with an attachment or not.

Ckenefick (talk|edits) said:

7 March 2014
As MsCash's cites point out, not without peril.

We all know that IF someone else claims the exemption, we're might have problems. The IF is predicated on the ex spouse violating the divorce decree. If the ex spouse has done so willfully, then guess what, that ex sure as hell ain't gonna sign a waiver. If the ex did it on accident - maybe mixed up the alternating years - then the ex would likely be amenable to signing the waiver after the fact.

Wilson said this:

[I can see how it would come up if both parents claimed the child. Otherwise... well, this just strikes me a yet another Exercise in Wasting Taxpayers' (and Tax Preparers') Time. Trying to settle a dispute where none exists.]

Death&Taxes (talk|edits) said:

7 March 2014
With the ability to withdraw the 8332, the area has become a minefield. I think of Dr. Szell, the 'dentist' in Marathon Man. I explain the need for the 8332 to my client, and so he produces it and asks, 'is it safe?' "No, because the bitch can withdraw the permission and leave you high and dry."

I am being unfair....often the case is that the husband has right to claim a dependent, but is hit by AMT and dependent is the proverbial 'tits on a bull' but he won't waive that right and wants the 8332. You learn a lot about your clients when you get into this area.

Captcook (talk|edits) said:

7 March 2014
In my amicable case, the dependency exemption was disallowed to my client after the fact by the IRS when we had properly claimed his daughter. To respond to the notice, I needed to get a copy of a signed 8332. The IRS did not accept a copy of the divorce decree as support for the exemption. The ex-wife had not claimed the daughter. Luckily, it was a simple matter.

Ckenefick (talk|edits) said:

7 March 2014
In my amicable case, the dependency exemption was disallowed to my client after the fact by the IRS when we had properly claimed his daughter.

I gotta say, that sounds awfully strange. The IRS doesn't willy nilly disallow dependency exemptions, out of the blue, for no reason. Although I will admit, they are perfectly within their bounds to inquire about it, and then deny the exemption, absent proof provided to the contrary. Hence my thought that this issue shouldn't be brushed under the rug altogether.

But, what else was going on? Did ex use that child's SSN on her tax return for some other reason - EIC? Was there a name mis-match, with the SSA, on that dependent? Did they send a notice specifically asking for the 8332 and nothing else?

Ckenefick (talk|edits) said:

7 March 2014
The IRS did not accept a copy of the divorce decree as support for the exemption.

At what point was this given to the IRS - was it attached to the return?

Captcook (talk|edits) said:

7 March 2014
It was not attached to the return. I had a copy in the file and sent it in response to the notice. They responded telling me I needed a signed 8332. In this case, the ex-spouses alternated claiming the daughter. When we got a signed 8332, the exemption was allowed.

The initial notice simply removed the dependency exemption saying my client was not eligible to claim it. If I remember correctly, he could not claim the child tax credit because he was not the custodial parent, but the exemption did provide him a benefit.

Ckenefick (talk|edits) said:

7 March 2014
I guess you just proved Wilson's point. You didn't attach the 8332 to the original return, provided it later, and all was well.

Captcook (talk|edits) said:

7 March 2014
It depends on your perspective. I don't view receiving correspondence from the IRS as something to provoke, which I feel not attaching the form does. Bottom line, the result was acheived, but not without more time and effort on the part of me and my client. If his situation was not amicable, then the client could be setting him/herself up for paying late penalties and interest on the balance.

Ckenefick (talk|edits) said:

7 March 2014
I don't view receiving correspondence from the IRS as something to provoke, which I feel not attaching the form does.

I think Wilson might ask: Are you really provoking something, or truly exposing yourself to correspondence, in the situation where the dependent is not duplicative?

If his situation was not amicable, then the client could be setting him/herself up for paying late penalties and interest on the balance.

And this is where the client might have a beef with the preparer, if the preparer doesn't inform the client of the rules. But do note, that in an umamicable situation, the ex might not be inclined to provide the form anyway, maybe...depending on where we're at in the divorce timeline. And if that deduction is denied, I can also see the client blaming the preparer, who then blames the client and the attorney.

All of this does raise the question: You tell the client about the rules. Client says, "I can't get, or don't want to get, the form."

What now: Insist that the deduction cannot be claimed?

Kevinh5 (talk|edits) said:

7 March 2014
Some of you folks act like rules are made for everyone else and not for you. The rules state you MUST have the 8332 to claim the exemption if you are the non-custodial parent.

May I ask why you think you don't have to follow the same rules that everyone else follows?


The rules do NOT say 'only if there is a dependent duplicitivly claimed....'. Sheesh.

Captcook (talk|edits) said:

7 March 2014
Thank you, Kevin.

Ckenefick (talk|edits) said:

7 March 2014
Some of you folks act like rules are made for everyone else and not for you.

Some of us act like this is the real world and being a strict constructionist in this area might not be the appropriate view. We do need to be sensitive, however, to the IRS' concern here: That the IRS could get whipsawed if two ex-spouses claim the same dependency exemption. That is what these rules are all about. If your client is the one who claimed the exemption, with or without the 8332, and no one else claimed the exemption, then the IRS has not been whipsawed. No harm, no foul.

And, the IRS seems to be very content with this result and with having the statute operate in this fashion. The IRS is not challenging people when there is not a duplicative dependent - although they certainly have the right to, I will admit. And if they do, there is a CCA out there - written by the IRS - that says they can consider an 8332 that is presented during an examination. I've already said this, but maybe it didn't hit home...and maybe some of you did not take the time to find it, read it and evaluate it.

The conclusion in the CCA is a tell tale sign that the IRS does not view the attachment requirement from a strict constructionist standpoint. If they did, the CCA would have come to a different conclusion. The CCA would have said: "No, no, no. That's the law. It must be attached to the return. If it wasn't, end of story. No deduction. It can't be considered during exam." Basically, what the CCA tells us is that the IRS, if they are so inclined, are fully authorized to get to the real truth...but, they can only bend so far. If the real truth is that the non-custodial parent is entitled the the deduction, per the agreement, this truth will only be agreed to by the IRS if an 8332 can be produced. Fair enough. They bend a little by considering it, we bend a little by producing it.

I tend to think the 8332 is an expedient way for the IRS to resolve some of these duplicative dependency cases. The IRS can pull both returns and if the 8332 is attached to one of them (and forgetting about any revocation), then that person wins.

And here we have Captcook, who clearly violated rule, by not attaching the 8332. And, look what happened: Nothing. Everything worked out fine. Seems Capt is fine with working off of a divorce decree. I would be too if I couldn't get the 8332 for whatever reason. But I certainly wouldn't deny the client the exemption just because a-hole ex won't sign the 8332. If the IRS wants to deny it, so be it. In that case, there would be nothing the taxpayer could do about it. As Mscash has shown, you will not win the fight. This is despite that fact that we don't see "if and only if" language in 152(e).

Death&Taxes (talk|edits) said:

7 March 2014
There is another question that must be asked of the client, because 99% of these release of dependents and 8332 being provided are contingent on the non-custodial party being up to date on child support or other conditions in the agreement. Sometimes our clients will swear on the proverbial stack of Bibles that all is up to date, only to find the other side, Ck's A-hole, in total disagreement. Maybe in a situation like the Captain had, the form was magically given when deadbeat Mom or Dad suddenly came up with the past due monies, and the check cleared.

We tend to think these rules simplify matters, but as usual, the world intervenes.

RuthC (talk|edits) said:

8 March 2014
I agree with Kevin. I always make sure the client has the Form 8332 and do either attach it to the return or mail it in. This form always makes me feel there will not be any problems with the exemption. Why wait for any problems and then have to deal with an unhappy client who gets an IRS notice and may have to charge them for getting it straightened out after? What is the problem with doing what is "required"? Unless some preparers like the extra drama for the clients and count on the extra fee during the year. Just do it and be done with it!

Ckenefick (talk|edits) said:

8 March 2014
I always make sure the client has the Form 8332 and do either attach it to the return or mail it in.

Fair enough. But what if you don't have it - Do you take the deduction or not?

RuthC (talk|edits) said:

8 March 2014
It depends on the situation. If I know the client and his situation with the ex I might do it. I would have to be pretty confident that the ex would not claim the person. I would fully explain to the client the ramifications if a problem arose. I have great clients and have never been in that situation to decide. They always comply.

Ckenefick (talk|edits) said:

8 March 2014
Ok, so then you disagree with K5 as to this point.

RuthC (talk|edits) said:

8 March 2014
I do not disagree with K5. Don't put words into something that I didn't write! As I wrote....I have never been in that situation before. I would push the client to get that form. I most certainly follow the rules and would go to the end to make sure things are done correctly. That is why I have never run into that situation. I consider myself extremely conservative when it comes to claiming credits, etc. That is why I pick and choose my clients. I am not out for the mighty dollar as others might be. I love doing taxes and have been for many years. I don't have a huge clientele by choice, but the ones I do have are long term and I get referrals from them and others. I tell everyone that if they are looking for someone to "fudge" the numbers I am not the right person for them. I have lost some and gained many. So please do not put me in the same category of having rules made for everyone else and not for me!

Ckenefick (talk|edits) said:

8 March 2014
It's okay if you disagree with him. I mean, you didn't really say "no." You said "might." But that's what makes this Forum so good.

Anyway, K5 is strictly construing the statutory language. His reading of it is accurate and he is right.

It raises an interesting question when the IRS itself, in the CCA, construes it (i.e. the statute) more loosely. The CCA doesn't really tell us why the IRS might be nice about it, but it's conclusion is quite clear. Perhaps is just the old "spirit vs. letter of the law" issue. Of course, a judge, if it came down to it, wouldn't care about the CCA. In other words, if the IRS chooses a strict interpretation in the case of a client, we can't walk into court and point to the CCA. That has always been my fear with this 8332 situation. People are people, including IRS people. If your client pisses off the IRS what whatever reason, the agent might purposely ignore the CCA. If the agent is in a bad mood that day, he might do the same.

So, hopefully Wilson now has enough information to make an informed decision.

Wilson is absolutely right: Getting, or trying to get, a signed 8332 is often time spent when the result would be the same without it. The IRS is primarily interested in avoiding a whipsaw and secondarily interested in strict compliance. But, and this is a big BUT...the IRS has the statutory authority to deny that exemption if the 8332 is not attached to the return. And, depending on their mood that day, they might just do that even if one can be produced later. So, there is a risk if it is not attached. Wilson will just need to decide if his client is willing to take that risk.

Kevinh5 (talk|edits) said:

8 March 2014
And Wilson should inquire of his E&O as to their coverage if he clearly ignores a statute for convenience sake.

Ckenefick (talk|edits) said:

8 March 2014
I think Wilson knows by now (hopefully) that he should definitely not be making this decision unilaterally, without the client's consent, if the 8332 cannot be produced. And, I suspect if the client loses $1,000 in tax money, due to Wilson's negligence, Wilson probably wouldn't even file a claim.

Death&Taxes (talk|edits) said:

8 March 2014
Funny, IRS wants to avoid the domestic disturbance scene (many cops do too when called to one), but no such qualms hit them regarding the Durdens, honest God-fearing people who got royally screwed by the Tax Court.

Ckenefick (talk|edits) said:

8 March 2014
Funny you say that. I was thinking the exact same thing. Big dollars at stake with the Sec 170 issue...easy target for IRS, easy money for IRS, precedent has been set...to make the same kind of money on throwing out dependents would involve 100x the work.

Tax Writer (talk|edits) said:

8 March 2014
I guess I'm the odd (wo)man out on this one. I rarely as for this, I just confirm that the taxpayer has the right to claim the child. I always confirm the custodial parent. I can't actually recall any cases where the IRS has asked me for the form, or rejected a dependency exemption based on the issue. Most of the single parents that I see are unmarried/never been married, so in that case there is no divorce decree and the custodial parent gets dibs.

WilsonCA (talk|edits) said:

8 March 2014
So, I call up my client and tell him that to claim his daughter, the IRS technically requires him to get a form (the 8332) signed by his ex releasing the exemption to him, since he's not the custodial parent, and that if we don't attach this form to his return, the IRS could disallow the exemption. He says, "No, we have joint custody." I respond that the IRS determines custody strictly according to whom the child spent more days/nights with during the year. He says, "Oh, she's with me more than half the year."

I don't say, "Prove it."

(Did I mention that he's an attorney? Boy, you'd think I liked paying with fire or something.)

STG (talk|edits) said:

8 March 2014
Your answer would be, "Be prepared to prove it." And then tell him what documents might be needed.

STG (talk|edits) said:

8 March 2014
Unless of course EITC is involved, in which case, might need more "proof"

Tax Writer (talk|edits) said:

8 March 2014
Unless of course EITC is involved, in which case, might need more proof

Well, EITC and Form 8332 don't mix, since the EITC always goes to the custodial. Adding an 8332 to an EITC claim is basically saying that the client is not entitled to EITC. Its not my responsibility to play family law judge. I don't get paid enough to involve myself in my client's tangled mess. I certainly can't call the other spouse to confirm anything (privacy regs prevent any type of contact, and I wouldn't risk my license even if I had explicit permission). In the end, the only thing we have is the client's word. If they have problems with the IRS later, guess what? That's a separate engagement. Or they can deal with the mess they've created themselves.

WilsonCA (talk|edits) said:

9 March 2014
[Sorry - just an added note to my post just above: When I say technically, I mean as opposed to in practice. Every IRS rule is technically a rule, but some of them strike me as... less likely to be rigorously enforced.]

[And one more addendum (though I really didn't want to totally derail the discussion with this case in particular): the only reason I thought to ask about the 8332 at all is that he hadn't claimed the child in the past 2 years. Adds a funny twist in this case, though my original reason for posting was a more general inquiry.]

STG (talk|edits) said:

9 March 2014
Tax Writer - the client is now stating he had the client more than 1/2 the year, making the 8332 moot, but opening up EITC due diligence.

Ckenefick (talk|edits) said:

9 March 2014
Wilson, you are now throwing some added facts in. Now, client is asserting that client is the custodial parent. So, the evidence of proof is different, as STG states.

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