Early tax question

[lucky]

Ok, got an early tax question.

DH has sole physical custody and joint legal custody of YSD (17 yo).  Because I held her accountable to our rules, she moved out in the middle of June and is currently living with her mother.   DH has refused to sign over custody due to how their mom lets them run wild - if it got bad enough this way he has some legal leverage.

They live in a 2 bedroom apartment and OSS (20 yo) and his gf (22 yo) have one bedroom, mom has the second bedroom and YSD gets the couch with a closet in the entryway for her stuff.  Mom does NOT buy food - she eats fast food or stuff like ramen noodles all the time.  Since YSD moved in, she's gone to the food shelf each month to get food for YSD that mom, mom's bf, OSS and OSS's gf all share.  Their electricity & cable/internet/phone has been shut off a couple times since YSD moved in.  Currently mom is behind in rent approximately 4-5 months, her bf is loaning her $1000 and she's getting the rest through social services. 

Basically YSD has purchased her own food, feminine products, paid for her own laundry, her own school lunches, and her own phone since she moved in there.  We have purchased her food, paid for all her medications (she has athsma), paid for her doctor & dental visits and paid for her health/dental insurance since she moved in there.  Prior to that, she only paid for "extras", like clothing outside our budgeted amount, movies, school dances, etc.

We believe that given this we've more than paid over half of her care, plus dh retains custody even though she isn't physically here.  Would dh be legally ok to claim YSD on our taxes this year?  We've been told that mom wants to, even though she hasn't paid for a damn thing - if you don't pay the rent, you can't claim you paid it as part of your support!  Right?

[Ref]

The key here is how much time she lived with you over the year. It seems like she moved out at about 5 months into the year. One of the rules is if the  child lived with the taxpayer for more than half of the year.  It seems like she didn't by a hair.

Did she have any overnights with you since she moved out? In 2007 the IRS issued proposed regulations stating that the custodial parent is the parent whom the child resides  for a greater number of nights during the calendar year. They have gone ahead and adopted this rule.

One other question. Does your divorce agreement mention anything about tax treatment?

I have heard some people on this board say that if you file first, you will likely get the dependancy, at least initially. When BM files she may have to argue her case. I haven't experienced it before, but this is what I have heard.

Another angle, if you have any type of decent relationship with BM, is to calculate what benefit you would get from claiming her and do a rough guess at what she would get if she claimed her. If you get a greater benefit, you can offer to pay her off for the dependency. Say you would get $2000, tell her you would get over $1000 and offer $600 for her to sign the form 8332, Release of Claim to Exemption of Child of Divorced or Separated Partents.

I know DH's ex would rather take $100 in tax benefit and screw him rather that get $500 in cash and let him benefit. If you are in the same boat, this may not work.

Take care
Ref

[lucky]

We're in the same boat as you guys, she'd rather screw us than work something out.  We were told that she's po'd at dh for not signing custody over because she wants that tax break 'cuz she "deserves it" for taking YSD in when I kicked her out.  Long story, but she left on her own.

Perhaps we need a tax professional to do our taxes this year instead of doing them myself...

Thanks for your insight, Ref!

[Kitty C.]

Lucky,

A lot can depend on your tax history............how many years has your DH claimed your SD on his taxes? 

Ref is right....he who files first, gets.  We had that happen to us, when BM wouldn't settle for proof that DH was current on CS by 12/31 of the year in question.  And I had already filed our taxes.  We finally got a notarized statement from CSRU, which she finally accepted.....but by this time, it was past April 15th.  That following Christmas, we got a letter from the IRS, telling us that SS's SSN had been used on 2 different returns but if we had filed correctly, we could ignore the letter.  If we had made an error, we were to fill out the form and send it back.  We ignored it.

But we were worried, so I made enough phone calls to finally get a real human with the IRS at the local office.  She was the one who first told me that he who claims first, gets the deduction.  For the past 7-8 years, I've had ours filed within a week of receiving our W-2's.  She also said that since we had a consistent history of claiming SS on our taxes, the IRS would not investigate us claiming SS any time unless they had a red flag like this.  We only assume they went after BM, but we have no idea as neither she nor the IRS have told us the outcome.

Since we're not in the heat of tax season, you could try calling your local IRS office and see what they say.  I really don't think by law that the child must live with the claiming parent for 6 months, because DH has always been the NC in our case.  But...........it was also included in DH's order that he gets to claim SS every year if he's current with CS as of 12/31.  Personally, considering what your DH pays for and covers for your SD, I think he's entitled to claim her.  But I will tell you this for certain............if you either find out definitively that he can or you just take the chance and file, the BM will pitch a fit regardless.  So my suggestion is that if you do claim SD, file your return as soon as possible after Jan. 1.

Hope this helps, girl!   

[lucky]

Dh has claimed SD for 17 years now.  The IRS may wonder why BM suddenly claimed her.  I think we're going to go with the file first idea since I always e-file as well as filing as soon as I've got all the W-2s.  Given what I think we're going to owe even WITH claiming SD, it's worth chancing it, I think.

[Kitty C.]

You're absolutely right......given that your DH has claimed her for so many years, even if she were legitimately allowed to claim your SD, it would be likely that the IRS would investigate it, since it's such a deviation from so many years of returns.

But like I said before, if you're in doubt at all, try to contact your local IRS office and feel them out.  You don't even have to give identifying information to do that.

Also, watch for a letter from the IRS sometime in the latter part of 2009.....if you get it, then you will have proof positive she tried to claim SD, too.

Heck, in our case, we had the refund back and spent by the time BM conceded, but she had already filed and claimed SS, too!  One other thing to think about...........if the BM tries to claim your SD and her return gets flagged because she's already been claimed on yours, it could possibly hold up her entire return........including any refund she might be legitimately entitled to!  That would be karma at it's finest, LOL!

[Ref]

FYI

The IRS issued this guide in 2007, but it is still good.

http://www.irs.gov/pub/irs-pdf/p4449.pdf (http://www.irs.gov/pub/irs-pdf/p4449.pdf)

You will note that it says that you would need a form 8332 or something similar for release if you are non-custodial under the IRS definition. The "something similar" can be a divorce decree with wording stating that you get to claim the child.

Just thought I would throw this out!

Best wishes
Ref

(http://www.irs.gov/publications/p504/index.html)

[Kitty C.]

Thanks, Ref!  I forgot about that! 

I have been filing through Turbo Tax for the past 7-8 years.  I have indicated in the return that we have to use that form (and it has printed off with the rest of the return), but they have NEVER requested the form to be signed and returned!  But the one beauty of the form is that you can do this for multiple years at a time, so you don't have to get the other parent to sign it every single year.