Written Declaration Releasing Claim to Non-Custodial Parent
In order for the non-custodial parent of a child to claim qualifying child tax benefits, there are very specific regulations that must be followed to the letter.
Whether you are a custodial parent wishing to remit tax benefits to a non-custodial parent OR a non-custodial parent wishing to receive said benefits, the following information is crucial to properly preparing your federal income tax return.
The final regs state that if the custodial parent releases to the noncustodial parent the claim to the child as a dependent, the release must be a written declaration and it must be unconditional (no strings attached such as requiring the noncustodial parent to meet support payment obligations). It must name the noncustodial parent and specify the year or years for which it is effective. If it specifies “all future years,” it is treated as specifying the first taxable year after the year in which it is executed and all subsequent years. The written declaration may be made on Form 8332, or successor form designated by the IRS. If the release is not made on the official IRS form, it must conform to the substance of that form, and it must be executed for the sole purpose of serving as a written declaration under this section.
A Court Order or Decree or Separation Agreement May Not Serve as A Written Declaration* (because it has other purposes than releasing the dependency to the non-custodial parent). The IRS also will not accept a state court’s allocation of dependents because IRC Sections 151 and 152, not state law, determine who may claim a child as a dependent for federal income tax purposes. The noncustodial parent must attach a copy of the written declaration to his or her return for each year in which the child is claimed as a dependent. * Swint, (2014) 142 TC No. 6
Effect on Prior Multi-Year Releases - Although the final regs apply prospectively, they clarify that a multi-year written declaration will be treated as satisfying the release format requirements under the final regs, if it satisfied the requirements for the form of a written declaration at the time it was executed. The regulations also provide that a release executed on or before July 2, 2008, may be revoked.
In Ltr Rul 200925041, a Chief Counsel Advice that may not be used or cited as precedent, the IRS said that a noncustodial parent may continue to attach pages of a divorce decree or separation instrument executed on or before July 2, 2008, that unconditionally allows the noncustodial parent to claim an exemption for a child, if the pages constitute a statement substantially similar to Form 8332 under the requirements in effect at the time the decree or agreement was executed.
Revoking the Release - The declaration releasing the claim to the child’s dependency may be revoked if:
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A written notice of revocation is provided to the other parent.
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The parent revoking the declaration makes reasonable efforts to provide actual notice to the other parent. Facts and circumstances will determine what attempts are “reasonable,” but mailing a copy of the written revocation to the noncustodial parent at the last known address or “at an address reasonably calculated to ensure receipt” will satisfy the requirement.
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The revocation is effective no earlier than the taxable year that begins in the first calendar year after the year in which the parent revoking the written declaration provides, or makes reasonable efforts to provide, the written notice.
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The revocation may be made on Form 8332 or its successor. If not made on the IRS form, the revocation must conform to the substance of the 8332; it must be a document executed solely for the purpose of making the revocation and must specify the year or years the revocation is effective. A copy of the revocation must be attached to the parent’s return for each taxable year for which the parent claims a child as a dependent because of the revocation. The parent revoking the written declaration must keep a copy of the revocation as well as evidence of delivery of the notice to the other parent, or of the reasonable efforts to provide actual notice.
Caution
The custodial parent’s release of the claim is a condition of the non-custodial parent claiming the child as a dependent. Absent the written release, the non-custodial parent may not claim the child for the dependency exemption (years before 2018 and after 2025) or the child tax credit. Further, under Reg. 1.152-4, whether the custodial parent releases the claim to the dependency, both parents may claim the child as a dependent for purposes of claiming the child’s medical expenses (Sec. 213(d)(5)), with respect to fringe benefits (Sec. 132(h)(2)(B)) and amounts received from employer health plans (Sec. 105(b)).