tax return question

[wysiwyg]

IN - court order reads:  The Petitioner should be entitled to declare the minor child as a tax  exemption for income tax purposes beginning in tax year 1996, so long as the Petitioner is current in  all child support payments due as of December 31st of the calendar year for which the Petitioner is declaring the exemption. The Respondent should execute any and all documents required for the Petitioner to exercise said exemption as required by applicable state or federal taxing authorities.

Situation:

BF is under a income with holding order, Employer closed out his books as of Dec 31, 2004 paid all employees up to and including Dec 31.
BF has all paycheck stubs to show child support paid via income with holding.
Last CS sent by employer was paid on Dec 31, 2004 was posted on Jan 5, 2005 and Jan 6 2005 (Septerate checks sent mail to courthouse)
BF asked BM to sign IRS form to claim child she refused stating support was not paid as of the 31st.  BF tried to reason with BM that it was unreasonalbe to expect the employer to have the payments sent and posted prior to BF making the money in order for the payments to posted by the 31st.  BF has all paycheck stubs to prove a consistant and timely payment via income with holding and all before 12/31.  BF went to court house on Dec 31 2004 to make sure all payments were made - courthouse was closed. The formula the CS uses to calculate payments made between 1/1 and 12/31 are total paid vs total owed.   paid $14,277 owed $5,200.  (Additional paid was due to an arrearage that was paid off).  Courthouse or child support dept will not answer questions regarding grace period or how payments are posted (as in how payments made in same envelope get posted on 2 seperate days).

Got a letter form IRS today that the child's SS# was claimed by both parents and to make the proper adjustments if we were wrong and resubmit.  

1.  What should I do?

[socrateaser]

>1.  What should I do?

Provide IRS with a copy of your order and copies of your pay stubs showing that you're current. Then the IRS will want to see the other parent's proof that you're not entitled to the exemption.

Based on your facts, I don't see what the other parent could provide to contradict your proof, i.e., apparently the court collection documents show that you are not only timely paid,  but actually, overpaid.

Therefore, the IRS would give you the exemption on grounds that a court order provides you to the right to take that exemption.

If I'm missing something, let me know what it is.

[wysiwyg]

nope you are not missing anything.  I did provide the IRS with all the documentation when we filed - but then again it was stated to me that they do not look at that upon filing but I figured I would cover the bases at square one.  I have certified copies of all documents to provide.  

IN law is fairly vague in this area as the only thing I can find is that the employer can be found liable for payments the employee made but were not forwarded to CS and employer will only be expected to pay what was taken out of employee pay.  QUESTION #1: Is there any IN Law I can refer to?

QUESTION 2: is there not some legal term for this type of situation, paid in good faith per income with holding credited timely etc?

I have an appointment with attorney next week for another contempt issue and we might discuss it then with him and ask him to send a letter to her attroney to clear up this mattter ASAP - QUESTION #3- what would you tell her attorney?

Thanks again for all your help - I feel so prepared when speaking to our attorney and feel more confident having the knowledge you ahve provided to me.

THx!

[socrateaser]

>QUESTION #1: Is there any IN Law I can refer to?

Don't bring this up with the IRS. Remember you're dealing with an auditor who is not likely a lawyer. If you provide proof of your position, the auditor will go back and ask the other person for proof, or the IRS may just decide in your favor, or against it. If the issue every reached tax court, then you could argue to the court that you are timely paid, and that you shouldn't be held responsible for the employer's failure to pay timely, because you did what you were legally obligated to do under the order -- you paid.

>
>QUESTION 2: is there not some legal term for this type of
>situation, paid in good faith per income with holding credited
>timely etc?

Don't raise the issue until it becomes absolutely necessary.

>
>I have an appointment with attorney next week for another
>contempt issue and we might discuss it then with him and ask
>him to send a letter to her attroney to clear up this mattter
>ASAP - QUESTION #3- what would you tell her attorney?

Family law attorneys do not usually want to get involved with federal tax law issues. But, if the other parent/state collection unit, was never paid by the employer, then you and the other parent should be suing the employer together to recover the money and for any damages that you may have suffered as a consequence.

I could argue either way, that you aren't responsible after garnishment, because you complied with the court order, or that you didn't comply with the underlying order to pay the other parent. The fact that the state court might demand that you pay again, and go after the employer to get compensation, doesn't necessarily mean that it's fair that the other parent be able to use your good faith actions to punish you, because of what the employer did outside of your control.

You could go back to court and ask the court to find that you have acted in good faith and that it is fair to award you the exemption as long as you actively persue recovery from the employer.

It's a crap shoot. I'd send in my proof and let the other parent try to prove her case and just wait and see where you need to go next.

[wysiwyg]

I would not really pay this any mind if it did not mean a difference of $3,500 that we would have to pay had we NOT claimed the child or have to pay back if the IRS just throws in the towel and sides with mom and tells us to battle it out elsewhere!