IRS Trumps Decree? Who claims kids?

divorced '06

2 kids - 6 and 3

Me = 55%...her = 45%

decree states "she shall be entitled to claim the tax exemptions for the children in 2006 and all subsequent years in which such exemptions may be claimed."

I have kids more than 50%, and the IRS says that means I must get deductions.  Granted, we can AGREE to let her claim them, but I'm tired of agreeing.  Thus, if I claim them, the IRS trumps the decree as it is FEDERAL LAW.

so what do ya'll think?  how do I get around this?  she will NOT simply agree to let me have the deductions, so what is my recourse?

Joe Bob:

Thus, if I claim them, the IRS trumps the decree as it is FEDERAL LAW. so what do ya'll think?

I'm a tax lawyer, and I think you will lose unless there is some defect in the decree that makes it invalid. The IRS, btw, the doesn't write the law and doesn't "trump" state law or state court decisions. You are correct, though, that a state court cannot override federal tax law, but that isn't what is happening here. Federal tax law says that you get the dependent exemptions if you have physical custody of the kids for the greater part of the year (i.e. they spend more days with you than with the ex) unless you agree to waive the exemptions and give them to her by executing a Form 8332. So, federal tax law gives you a choice. The IRS doesn't really care which of you gets the exemption, so long as the rules are followed.

That's where the state court steps in. Since federal tax law gives you the option of waiving the exemption, the state court can order you to do that. The order does not violate federal tax law since executing the Form 8332 to give her the exemption is allowed under federal tax law. As a result, if you refuse to execute the Form 8332 so she can claim the exemptions that are given to her in the decree, she can bring an action for contempt in the state court that issued the decree. You reallly don't want to go down that road. It could result in you ending up in jail until you execute the form. Before you decide not to give her the Form 8332 and claim the exemptions yourself, I strongly urge you to see your divorce lawyer to find out what the likely outcome of that will be for you given the decree you have.

Laymans take:

taxagent is correct--have you lawyer comment on your order as a whole--

That language you quote is extremely open to two different views and does not come close to what my understanding is the IRC demands there be in the order for those years where an order w/o a 8332 can be used .Nor does order seem to say you need to grant her an 8332--it sort of rules out the opposite if she qualifies she need NOT give that up and issue you an8332.

And it may depend on which side drafted the order.

And it makes NO SENSE at all that you listen to her as to her letting you claim kids. It is NOT up to her at all.

I see the language as stating  that IF she meets the IRC requirements as to time and % of support to claim them then she shall be entitled to do so---and I read it also in context that if she does NOT meet the times and % of support then you are NOT under any duty to waive your rights and issue her an 8332--why, because thats not what order says.

And for that matter if my guess is correct and the facts are you qualify to claim kids in past years which also means she did not qualify , then you may be wise to file timely amended returns for each past year inside statute of limitations (3 years)

Drew:

That language you quote is extremely open to two different views and does not come close to what my understanding is the IRC demands there be in the order for those years where an order w/o a 8332 can be used

Drew, the IRC does not require any kind of wording for a divorce decree. If the decree itself were to be used for the waiver prior to the 2009 tax year, then of course it must meet the requirements of the waiver, which means that the decree would have to have the same information required by Form 8332 and it must have been signed by the poster, meaning the judge's signature would not have been sufficient for that purpose. If those requirements had been met, the poster would (prior to the 2009 tax year) not have needed to execute the Form 8332; she'd have been able to use the decree for that.

But if the decree does not meet the requirements of the waiver it may still work to give the ex-spouse the exemption. It does that by, in effect, requiring the poster to execute the Form 8332 to give her the exemption. The IRC doesn't matter for that. That's an issue of state case law—how the decree will be interpreted by the courts. In particular, how it would be regarded by the judge who signed it.

I don't think the wording quoted by the poster is nearly as ambigious as you do. There would be no reason to put a statement in the decree about exemptions if all it would do is give the parties the exemption when they had physical custody for the greater part of the year. They'd get that anyway without the need for any statement in the decree, and there'd be nothing that anyone would need to enforce. Rather, the intent of these kinds of provisions is that the non-custodial parent gets to claim the exemption even though she does NOT have physical custody for the greater part of the year. Every decree I've seen with wording like that has been enforced that way. Sure, the order doesn't explictly say he needs to execute the Form 8332, but it doesn't have to say that. That requirement is a natural consequence of the order that she is entitled to the exemption. Or, put another way, the requirement is implied. While I'd have written the provision differently to make it more explict and thus easier to enforce (the way it's written here may require more motions and hearings than might be necessary if it were better drafted), chances are the end result will be the same: he'll have to provide the waiver. Certainly, though, he ought to see a local family law attorney to have the decree reviewed and see if there are any defects in it that might help him here.

thank you all for the replies, and I apologize for the delay in my response.  I don't care much for the family law forum on here, but the taxation/business ones are spot on.

taxagent, I tend to agree with Drew in that the statement is ambiguous.  She gets the deductions for the kids when entitled.  there's nothing saying that she MUST get them if the federal statutes say she shouldn't get them.

while not a silver bullet, my attny is using it as a negotiating point to begin discussions.  "The decree can be interpreted in a different manner.  we want to negotiate a conclusion beneficial to all."  Granted, beneficial to HER means she gets the deductions.  My attny is confident that if it goes to trial, the judge will make things easy and simply split deductions, which I'm fine with. 

the 2nd point is that if I simply went off and claimed them, the IRS would come asking "Who had them 50%+?"  this is when the IRS will trump the decree.  they're not going to argue with us about the decree, they're going to default to their tiebreaker rules.  In that case, I win, but I'm theoretically in contempt of the decree.  thus, I'm just trying to do this on the up and up.

again, thanks for the replies.

I gotta agree with taxagent--but still a lot depends on your attorney and the judge as well as the others sides skills as to how to divine what was meant by less than clear wording. Sloppy words may tend to fall to left 99% of time but especially  if left wrote the sloppy words it just might be your day for sloopy words to fall to right --and the left may chose not to run that risk and compromise? 

And I suspect taxagent may agree--if Dad met in prior years the tests in IRC to claim child as his dependent  and absent an 8332 to the contrary or an order signed as describled by taxagent for earlier years and containing the required language then as far as IRC goes Dad can file not only for current uyear dependent but amend 2-3 prior returns . Dad may have a fight as to state court issues and could lose and might be ordered to make Mom whole plus sanctions--but thats a state court matter.

As I  recall part of the problem is IRS wanted to be out of the middle of such debates as to what the state order issued in backwater Georgia devined to mean --and how to get out of middle rules sort of changed a few times --the one gold standard being a properly executed  8332.

And in some cases parents get it so messed up that neither parent meets the criteria to properly claim child as dependent--an unwise situation to invite.

The fact that one view of the state is a restatement of the obvious, absent an order to the contrary,  doesn't make if the final word--EG some order  which says if A provides more than 51% of support and residence time than A shall be entitled entitled to claim child.

Clearly one side wil have view that  order means I am entitled to claim child no matter want , and to demand that a proper 8332(s) be executed and once same is executed then one does in fact properly qualify to claim the deduction.Its sort of a convoluted logic at least in engineering context --I qualify under an exception which has yet to be granted but once its granted I qualify on the face of the matter which means I do qualify now therefor the exception needs to ordered because it was the intent that I qualify no matter what. True--if I can prove intent was I qualify no mattter what. .

Clearly other side will have view that order means she gets the deduction  if she meets the tests in IRC and is not required to waiver her right to so claim via an 8332 to Dad.  But not otherwise EG Assume  she did provide 99% but  waiver it to Dad via 8832 the order takes that off the table and protects her --against a condition which did not come into being but could have.

Bottom line--use a good pro....

Drew:

And I suspect taxagent may agree--if Dad met in prior years the tests in IRC to claim child as his dependent and absent an 8332 to the contrary or an order signed as describled by taxagent for earlier years and containing the required language then as far as IRC goes Dad can file not only for current uyear dependent but amend 2-3 prior returns . Dad may have a fight as to state court issues and could lose and might be ordered to make Mom whole plus sanctions--but thats a state court matter.

Sure, if he had physical custody for the greater part of the year and did not execute a proper waiver to give the exemptions to the ex, the tax law gives him the exemption and he could claim it. But by not giving the ex the exemption, he almost surely will run into a problem with the court that issued the decree. Unless his attorney tells him that the decree as drafted is very likely unenforceable, he doesn't want to go down that road. The state court fight would cost him money, and if in the end he must provide the waiver and amend the return, he'll end up also paying the tax back plus interest. All the way around, that's costly and not worth the trouble. Further, the court fight might result in him spending time in the local jail.

In most cases, with wording like that given by the poster, this is a loser fight for him. That's because the statement simply says she gets the exemption without any qualification. As a result, if it is at all possible for her to get the exemption by the actions of the parties, the court is likely to insist they take those actions to give effect to the order. (Obviously if the law were to later change such that it was impossible for her to get it no matter what the parties did, that provision of the decree would become ineffective.) Before he goes down the road of claiming the exemptions for himself, he needs advice from a local family law attorney as to how the courts of his state will view the decree as written and what the consequences are of not giving her the waiver.

2 things - attny is a drinking buddy doing this pro bono for me.  So no lawyer fees involved.

- i have never claimed kiddos.  I've let her do it.  We'll file a Motion for Clarification, and make our arguments at that time.  Worst case = judge tells me to pound sand.  best case = he gives me all deductions.  probably case = he splits the deductions and kicks us out of the court.

attny is saying i COULD claim them because the wording is ineffective.  We could claim confusion as she is not ENTITLED to the exemptions.  However, we recognize the judge could pound me in the head for this assumption.  so we're going to play the "good guys" and explain taht we're just trying to clean this up.

One note worth mentioning:  I personally would be apprehensive about going to court when the other party could show that they have had the kids 50%+.  It would open the door for the judge to ask "Why are you even primary?"

Again my laymans ramblings.

1. You may have free/cheap legal resources but be sure the resource has sufficent expertise in areas you need.

2. I'm still hung up on if a Cira 2006 order which falls under prior rules does NOT meet the requirements of being signed by poster and have contents which meet the precise criteria necessary to meet IRC which sort of says have all the key words otherwise found on  form 83323 then that part does NOT qualify on its face! And if Mom does NOT meet the 50% + tests found in IRC then she does not meet those parts either! Then she flunks it both ways!  To me she has burden to cure it--why should you do her work for her?

Its not good guys that count--but rules, process, proceedure and attention to detail including law and case law, and lack of dirty hands.

True, judge could pound you in dirt for a frivilous excuse you seek to debate--but I think there is a true  lack of clarity and or intrepretation your way--again depends on how your advocate presents it.  Or judge could direct you to complete a 8832

3. Me, If I felt the correct position as carefully reviewed by counsel was A and the downsides to being wrong were rather limited--as in being required to back up and restart at A then I lean towards taking position A and forcing my opponent to argue otherwise --I'd not seek to ask permission to take A.   But rediscuss with counsel.  I suspect you have to be in willful violation of a clear court order before sitting in jail is a likely outcome--that fact that postion A v B is not clear sure seems short of same to me.

4. Me, if the facts of the situation were such that Mom was no longer primary and the new status quo was that I was primary I might assertively  petition for a modification of the order to accurately reflect new in place for some time status quo. I think you may be better to force it at a time and context you chose than for her to advance an alternate view .

    I might be able to bury a clarification issue under a different rock in  same petition--I'll bet your counsel can do same only better .

5. Go back to #1---average professional gunslinger still beats laywoman with rubber knife (pro se) 99.5 times out of 100 at OK Coral 

   Even free counsel works a lot better if you pay them ! So don't wear out the welcome mat---put in some decent money ......

Drew:

2. I'm still hung up on if a Cira 2006 order which falls under prior rules does NOT meet the requirements of being signed by poster and have contents which meet the precise criteria necessary to meet IRC which sort of says have all the key words otherwise found on form 83323 then that part does NOT qualify on its face! And if Mom does NOT meet the 50% + tests found in IRC then she does not meet those parts either! Then she flunks it both ways! To me she has burden to cure it--why should you do her work for her?

Drew, you are trying too hard to find ambiguity that is not there. The new IRS regulation effective for tax year 2009 does not change the analysis of this one bit. The only effect of the regulation is to say that the Form 8332 must now be used for the waiver exclusively and that court decrees themselves cannot function as a waiver. The poster's order almost certainly did not qualify as a waiver prior to the change because, if nothing else, the poster likely didn't sign it—only the judge signed it. But it doesn't matter that the decree doesn't function as a waiver. All that matters is if the order is sufficient under state law to force the poster to execute the waiver. It is not a tax law issue. In my experience, with provisions similar to the one quoted by the poster, a court will say that because the order gives her the exemption without qualification the effect of the decree is to force the poster to provide the waiver so she can get what the decree says she's entitled to get. It's possible that the courts of the poster's state MIGHT view it differently, though I'd bet against it absent some good case law in the poster's state saying that the decree is in some way not effective as written. As I said before, the poster should get a family law attorney his state to review it for him if he wants to pursue it.

Drew:

3. Me, If I felt the correct position as carefully reviewed by counsel was A and the downsides to being wrong were rather limited--as in being required to back up and restart at A then I lean towards taking position A and forcing my opponent to argue otherwise --I'd not seek to ask permission to take A.

Win or lose, if he forces a legal fight on this, he'll have the expenses of that fight to pay. If he loses, at the very least he'll also have interest to pay to the IRS. He may also have damages to pay the ex for her inability to claim the exemption until the court forced him to provide the waiver. So, he'll want to be sure of the strength of his legal position going into it, and will want to make sure the exemption he gets is worth the cost of the fight.

taxagent,

you continue to imply I might be subject to damages due to falsely claiming the exemptions...I have made no claim.  she has always claimed kids.

you also say "she can get what the decree says she's entitled to get" and that's the crux.

this language says "she shall be entitled to claim the tax exemptions for the children in 2006 and all subsequent years in which such exemptions may be claimed."  she can't claim exemptions when she doesn't meet the threshold according to the IRS.  that's my argument.  that statement sets up ambiguity.  I can argue it says she only gets them when she meets the threshold, she'll argue she gets to claim them forever regardless.  thus, a judge clarifies.

Trouble is that my background may be good as to math type logic but taxagent brings on point legal expertise especially on tax matters--so if he suggests that he has seen like or similar language to mean she gets it no matter what--I'd sure give that a lot of weight ---that doesn't mean you and your counsel don't see an alternate view even as a workable bluff --but I suggest you work extra hard to posture and research your view  (If enemy is unwise enough to take you on pro se you and your counsel may not have to work too hard) And if your buddy attorney hasn't done divorce law issues since he got out of law school you may want to induce him with $$ to recehck or you recheck. One of my friends is perhaps a brilliant tax lawyer but I watched him blow a point on family/divorce law that he said was positively clear --he hadn't a lot of hands on experience in that area

Joe Bob:

taxagent, you continue to imply I might be subject to damages due to falsely claiming the exemptions...I have made no claim. she has always claimed kids. you also say "she can get what the decree says she's entitled to get" and that's the crux. this language says "she shall be entitled to claim the tax exemptions for the children in 2006 and all subsequent years in which such exemptions may be claimed." she can't claim exemptions when she doesn't meet the threshold according to the IRS. that's my argument. that statement sets up ambiguity. I can argue it says she only gets them when she meets the threshold, she'll argue she gets to claim them forever regardless. thus, a judge clarifies.

I have seen parents try to use that kind of argument in state court, and I have seen them seriously slammed by the state court judge for doing so.

You know, and I know, and your attorney knows that what the bolded means is "as long as the children can be claimed as dependents".

Therefore its wise that you are taking this to court as opposed to just arbitrarily taking the exemptions.  However, I think that you are foolish to go in there using that argument at all.  It is a spurious argument and very likely to annoy the judge...particularly if there was a particular reason why mom was given the exemption every year.

It is very much the norm for the exemptions to be split.  Either by splitting the children's exemptions or alternating years.  If you were not given that in the first place, then the judge either saw it as more "just" for mom to get the exemption, or you simply agreed to it at the time.  If you simply agreed to it at the time, then rather than going into court with a spurious argument, you she simply petition the court to modify the orders to allow for the exemptions to be split.

If you did not simply agree, and the judge saw it as being more "just", then you still file a motion to modify, and go into court with arguments as to why its no longer "just".  Unless there was a very particular reason (ie she agreed to an unbalanced property settlement if you agreed that she got the exemption every year) why she was given the exemption every year, the case should be winnable for you without any silly wrangling about the interpretation of the orders...again, because its very much the norm for exemptions to be split in one manner or another.

a judge did not decide to give her the deductions - I gave them to her so that I could enshrine my 50/50 split on kid-time.

We are not pushing this to court, we're requesting mediation.  I'm hoping the mediator will remind her and opposing council that the judge will likely split the deductions, which is an outcome I'm ok with.

"she shall be entitled to claim the tax exemptions for the children in 2006 and all subsequent years in which such exemptions may be claimed."

Emphasis on the words "MAY BE CLAIMED." If the judge did not order a 8332 waiver to be signed then I would argue that she was able to claim the kids in 2006 as ordered, but since the federal law authorizes you to claim the kids a majority of the time you should be able to claim them as dependants because she is not entitled to claim them as exemptions under the current tax law unless you sign the 8332.

That is why you have a lawyer.

Shall or must —used in law where the sense, purpose, or policy requires this interpretation, however "may" is ambiguous as meaning optional.

Why not agree to alternate tax years?