Posted on December 15, 2014
After all of the time-sharing schedules have been hammered out and the holiday schedules painstakingly set in stone, the issue of the child tax exemptions comes to the forefront of the settlement discussions in a divorce . Tax exemptions add up to a lot of money–and for some, might make or break your budget for the year. The parent with the majority of the time sharing typically is entitled to claim the exemptions but it does not have to be this way. The parent with the least amount of time sharing might also be able to claim the exemption, provided the parties agree.
No one wants to be the subject of an IRS Audit, but it may be inevitably so if you and your significant other do not resolve the issue of the exemptions upfront. There are at least three things you need to know when you are dealing with the exemptions for the future tax years.
First, get your agreement on the tax exemptions in writing. Do not leave this issue to chance—oral agreements are great but having something in writing will save you money in the long run. Second, be familiar with IRS Form 8332 , also known as “Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent”. And third, review the requirements of the IRS’ Earned Income Credit , specifically Rules 8 and 9, which specifically set forth the “relationship, age, residency, and joint return tests” to properly claim your children on your tax returns. Knowing your rights and eligibility upfront will save you time, energy, and effort when dealing with a difficult spouse.