Denial of child exemption on a 1040
- July 15, 2010
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Many people are audited each year due to the IRS questioning their claiming children as dependents who are not biological or adopted sons or daughters. The basic rules are that the child has to have some relationship to the taxpayer, has to live with the taxpayer for the majority of the year and that the taxpayer must provide the majority of the support for the child. Most problems arise when two ex-spouses both claim the child. The IRS
assumes the first to file is the correct one and it is very difficult to move them from this position. Proof, including affidavits, school records, bills, etc., must be submitted to show the relationship, the residence and the financial support.
This problem can also arise when a state court grants the non-custodial parent the “right” to claim the children as dependents. The first thing to realize is that the IRS, a federal agency, is not bound by a state court decision. However, the IRS will allow this switch if it is notified correctly. When the court gives the non-custodial parent the right to the exemption, that person needs to file a Form 8332 with his/her tax return. It is signed by both parents and states that the custodial parent gave the exemption to the non-custodial parent pursuant to the order. Without this form the IRS will look to the usual rules to determine exemption, i.e. where did the children live, etc. When this finding is made against a taxpayer, he has the right to appeal and prepare an amended tax return along with the proper forms.