Child Support: Statutory And Contractual (Page 14 of 23) in pdf

Child Support: Statutory and Contractual

Chapter 10

for the non-custodial parent to have and file as head of

It is recommended that (1) the noncustodial parent

household by claiming one of the children.

should obtain a signed release concurrent with the

entry of an agreed decree of divorce; (2) the custodial

Medical Care Expenses of Dependents

parent be ordered not to revoke any release of the

For purposes of claiming a deduction for medical

exemption; and (3) the attorney for the noncustodial

care expenses, a child is treated as a dependent of both

parent warn his client that the custodial parent can

parents if IRC § 152(e) is satisfied. Therefore, it does

revoke the release of the exemption simply by

not matter which parent is entitled to claim the

providing notice to the other parent.

dependency exemption. The IRS will also treat a child

as the dependent of both parents for certain employer

B. Negotiation

Chart

for

Child

Support

reimbursements of expenses for medical care of the

Maximization and Tax Reduction

employee’s child, contributions to an accident or health

Now, all the above is nice and easy to utilize if the

plan for the benefit of the employee’s child, Health

parties are agreeable. But since that doesn’t happen as

Savings Accounts to pay medical expenses of the

often as we would like, below is the demonstration to

taxpayer’s child, and other similar expenses regardless

the parties on why they should work together on taxes

whether

the

custodial

parent

releases

the

and kids and child support.

dependency exemption if the following conditions are

Start with the following premises:

met: 1) the taxpayers are divorced or legally separated

under a written agreement or have lived apart for the

No one likes to pay more taxes than

last six months of the calendar year; and 2) their child

necessary.

receives over one-half of his/her support from the

As obligee, your client will be happy to

parents, is in the custody of one or both parents for

receive an extra $100 per month in child

more than one-half of the calendar year, and qualifies

support. And if she can receive that and not

under § 152 (c) as a qualifying child. Again the

lose any thing when it comes to tax refund

qualifier here is half the calendar year distinction.

time, she is in a win-win situation.

If your client as obligor can count on getting

Conclusion

an extra $2,000 refund each year on his post

divorce tax return, shouldn’t he not have any

Beginning with decrees entered after taxable years

after July 2, 2008 (i.e., beginning after calendar year

problems with paying an extra $100 per

2008 for nearly all taxpayers), noncustodial parents can

month child support? It is a net gain to him

no longer rely upon their divorce decrees to support a

of $800 per calendar year.

claim of a dependency exemption in their tax returns.

Instead, based on the new permanent regulations, they

Now how to accomplish this? Utilize the chart at

can rely only on Form 8332 or other written

Exhibit F to know which numbers you need from each

declaration that is executed solely for the purpose of

party and input the numbers into the chart. At this

releasing

the

dependency

exemption

the

juncture, you contact your friendly local CPA and let

them work their quick magic for the ―what if‖

noncustodial parent. The declaration must comply with

the following requirements:

scenarios.

Ask them to run different calculations on the

The release itself must be unconditional. The

dependency exemptions with the presumptions you

declaration may no longer state that it is

present. Such as what if mom makes $36,000 and dad

conditional

upon

the

meeting

makes $82,000 per year (both as salaried employees;)

obligation, such as payment of child support

dad has mortgage deduction and mom rents her home

or the maintenance of life insurance for the

from a family member; they have three kids, one in day

benefit of the child.

care and the others in grade school and junior high; and

The release must state the year or years for

if each continues with same withholdings and

which it is effective. ―All future years‖ is

contributions to any HSA or retirement accounts.

treated as applying to the first taxable year

At that juncture, what should mom do for dad, in

after the year in which the release is signed

the way of giving the children to him for tax return

and all subsequent years. In other words, a

purposes and what amount should dad pay in

release for all future years signed in 2012

additional child support each month due to his increase

begins for tax year 2013.

refund?

The declaration must be attached to the

There are certain assumptions and understandings

noncustodial parent’s tax return for every

that must be reached and maintained. The CPA will

year in which the parent is relying upon such

need the end numbers after calculating itemized

deductions – usually easily obtained from prior years’

declaration.

tax returns which is especially easy in divorce context.

Child Support: Statutory And Contractual Page 14

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