If you are reading this, you have not been lured in by the sexy title. You have stopped by because you are most likely divorced, with children, and the term “dependent exemption” makes your heart beat wildly for one of these three reasons:
You are glad this is the year you can claim your children as tax exemptions.
OR
You are gnashing your teeth because this year your ex gets them and you are wondering what creative accounting you might substitute for those precious exemptions, so you don’t owe anything extra to the government.
OR
You realize the dependent exemption clause in your judgment is ambivalent and you need to make it un-ambivalent ASAP.
Ahem.
In The Beginning
When Prince and I divorced, we struck this deal: he would pay me Family Support (Spousal and Child Support combined) so that I wouldn’t have to pay taxes on alimony and could maximize my income. In return, he would claim exemptions on both chidren during the years he paid family support.
Then, when spousal support ceased, I would be able to claim the exemption for one or both children, although how I would do this without a fight was anyone’s guess.
Perhaps because I spent years trying to put out Prince’s flames and was too exhausted to deal with anything that wasn’t an emergency, or perhaps because I’m not great with details, or perhaps because Prince tried to get me to sign the requisite IRS forms transferring the exemptions to him ad infitum, I forgot that I was actually entitled to claim the exemptions.
In The Now
When I visited a new attorney last week, she told me that not only should I have been getting the exemptions every other year since Family Support ceased, but that I would almost certainly be awarded an exemption for one child if I went to court.
She drafted a standard stipulation requesting the transfer of the exemption for Franny to me until Franny turns eighteen. She told me to include a letter with the stipulation, advising Prince that it no longer made sense for me to give him the exemptions and asking him to sign the stipulation to avoid going to court.
Now. Any reasonable person would look at the big picture and say, I claim tax exemptions for both kids, a house, and for being married. She has no exemptions. I’m also hiding money. So why give her more ammunition to modify support when I could just give her the exemption and maybe she’ll go away?
But Prince is not a reasonable person, so he doesn’t think this way. That, and paying as little money to the government as possible is practically a religion in his family.
So I would not be at all surprised if I have to go to court to wrest the exemption from his Scrooge-y grasp.
On the other hand, Prince’s newfound niceness has given me just a smidgen of hope. Ever since Atticus and I split up and I moved into an apartment, Prince has been all please this, and thank you that.
And because disbursements from his family trust have to have been turned back on since the custody battle, and because he has well over a million dollars in equity in two houses, and because he most certainly has other assets of which I’m not aware, Prince has a lot of financial exposure should I try to modify child support.
Which I will consider doing once I request his most recent tax returns and an Income and Expense Declaration and see if the numbers work in my favor.
In the meantime, I’ll just send him the stipulation with my very diplomatic letter and hope that he gives me the exemption without a fight.
Guesses, anyone?
My guess: He’ll refuse to sign and you’ll have to take him to court and it will take at least 6 months and the judge threatening to jail him for contempt before he hands over any financials. During those 6 months he’ll have terrible business reversals and will be almost bankrupt. What a shock.
A good guess, Elizabeth.
Reading about your money troubles makes me sick…I just wish there were a way that your blogging could assist and you wouldn’t need a darn thing from the guy. Powerball, anyone?
I think I have better odds with Powerball than getting a decent deal with my ex.
I think he’ll fail to sign even when you say please and thank you, because this means HE won’t get that tax exemption anymore. But I think you are right to ask first then take it from there. Go, Girl. Grab your lady balls and go for it!
You can at least get the exemption every other year, which would be some savings. Legally, I think he has to do that.
You can try. But I know many situations where one parent has all of the exemptions. There is no cut and dry rule for this. You can ask as it makes a huge difference for you to be a Head of Household and get those goodies,which one dependent can give you, and he can’t get that designation. To be honest, I would offer him something if he’d sign and tell him that it’s that much more that the govenment will be giving back, less total in taxes that the two of you are having to pay, but I see no reason for him to give you the examption because it will cost him to do so. If he does, it’s a good sign that he is getting enough money that he may not even be using the exemptions. If he needs the exemption, those tax returns are not reporting a whole lot of money because higher incomes do start phasing them out.
If his family is anything like the ones I know, the money is being carefully managed so that neither you nor his current wife will likely be able to get your hands on it, and the family will pay a fortune to that end. Gifts are not reportable on taxes nor are things that get paid for you by Mama and Daddy. They spend fortunes to make sure that outsiders get not a penny one.
You are lucky you were able to keep Franny. My friends lost custody. Those with some shared arrangement ended up with their kids preferring to be with the better situated parent as they got older. Mom had too many problems. Dad’s problems affected them less. Kids get selfish in their teens. My friend slept on a couch and lived in her living room so that her DD could get the master and only bedroom in an apartment, for years. She still ditched mom, because Grandparents gave her a car on the stipulation it stayed with Dad. She’s in college now and prefers to visit her father more. If Mom gets a lunch out of a vist, she’s lucky.
And you have been more selfish, made more decisions that hurt your kids, big time ones, than my friends who focused their lives on their kids (no other men, living within means, stable living place–kids hate moves, total focus on kids other than making a living) than you have.
You might want to dispense some advice for those in your situation as to what mistakes your attorney made. Some areas where the advice was bad. The exemption might be such an example.. Really you each should get one kid as an exemption. That ‘s the way I’ve seen it unless one party makes so much it makes no difference. Then you give it to the one who can use the most and that estimated amount gets split in the settlement or child support payments. Since you get no such payment, and there is no benefit for Prince to give you that amount other than more money you get is better for the kids over all –something he and his family could not care less about, you need good reason FOR HIM, to give you this bone. I see none unless he wants to avoid another court fight. But these type of people tend to be happy to spend a million bucks to avoid giving outsiders, and that’s what you are despite being mother to the kids, a thin dime. That is the given. And you can’t afford to pay for this sort of battle. If you are doing this on contingency, once your attorney sees your ex’s financials, if they look like what I suspect they do (as his family is probably still shieding, in case marriange #2 fails and yes, they would be aware that you could always come back as you are contemplating for more, and for college financial aid purposes in the near future), your lawyer will run, as there is no place for her/him to get paid.
I’m old enough to be your mother and, I feel badly for you,as many of my friends went through your experience.You will have to be smart about all of this, or you can lose even more. The only friends who even retained seeing their kids, are the ones who were able to make a trouble free, stress free, stable area type environment for their kids,a safte harbor as the fathers did not bother to do so and their tempers, and life styles meant a lot of drama there. But in your case, Prince seems to be the one providing the stablilty. WIth a solid, capable, calm second wife, staying in the same locale, no money issues, no certanty issues, grandparents around, taking care of the problem efficiently (yeah, money can do that easier). You have moved, contemplating another move, antoher divorce so loss of familiar family aound–no matter how civil, the fact is that Atticus and son are no longer family, dating, money problems,and now another court battle where you are going to be hit hard and stressed. All reason for a kid to want to get away.
Excuse me, but I’ve been “selfish”? Have you read this blog? You think my ex, who treats everyone else as a pawn is NOT selfish?
1. My ex never takes the kids for a full weekend and I do (he wants to keep his Friday nights free).
2. For the first 3.5 years Franny was with me 90% of the time which meant I essentially never had a free night. And he wouldn’t take her on vacations until she was 3.5 so she’d watch her brother go without her.
3. He demanded an every other Tuesday night but insisted I drop the kids off to him at 5:30, in rush hour traffic.
4. When he started taking Luca on those Tuesdays, he would pick him up from school but leave Franny so I would still have to pick her up and drop him off at his house. All of this was to inconvenience me, and he didn’t care less what it did to her self-esteem.
5. One of the reasons I have a 3-bedroom is that I need to show that I can have appropriate housing for the kids. And I’d have to have at least a two-bedroom because I can’t keep a boy and a girl in the same room. If I’m sleeping on the floor then he could use that against me, saying I live like a poor person. And one of the reasons I live in a better neighborhood is because I didn’t feel safe in the last, affordable neighborhood, and Prince harrangued me for subjecting the kids to a less-safe neighborhood.
6. You paint me as an “unstable” person. I put myself through school, did clinical hours, work full-time and have given my ex everything he’s wanted while he traipses around the globe because his parents and new wife accomodate him. Even if Atticus and I had stayed together we still would have had to move because his business fell apart. And as for it “looking bad” that the second marriage didn’t work, well, I’m sorry. It’s certainly not a good thing, but second marriages often don’t work out. In sum, I’ve been far more responsible and hard-working than my ex.
7. Divorced women date — this is not a sign of selfishness. If there were a revolving door of men coming through the house, and I were doing drugs, and subjecting them that kind of craziness, then yes, that would be bad. Except for one weekend, I have not gone out on a weekend my kids were here. I don’t think it behooves a child to see their mother as a martyr with no life.
8. THere is not going to be an expensive court battle because I can’t afford it. If I go to court I will be representing myself.
9. Finally, the only reason my ex is more “stable” is because of the money. If I had more money I’d be more “stable” too.
Pauline,
I’ve been reading your blog for a long time and you are one of the least selfish people I know. I’m really sorry about the comment made by cath young. You are doing a great job with your children. Keep up the good work. Although my children are grown and the issues with my ex were different from yours I can relate to your problems and am always sending good thoughts your way.
Kathy
Thanks, Kathy — I appreciate your support.
Wow. People really do feel free to just say anything! Good luck with the exemption, we fought that battle and sort of won. Family court is like a parallel universe with its own incomprehensible rules. Glad to be free of that.
Pauline, I know you’re hurting and under so much pressure right now. I really wish you the best. However, part of the best is really recognizing errors you have made, unrelated to the ex. I’ve been reading the blog and have noted so many financial indulgences over the years. Bottom line…you couldn’t afford them. Please get some assistance in this or check out the blog the simple dollar-that helped me a lot w/my spending choices. No more Veuve Clicquot. And I mean that with love.
Yes, I could have chosen not to spend money on certain things. If I had it to do all over again, I never would have bought a house with my ex after the divorce. I let him brow-beat me into it. He threatened to get custody if I didn’t agree to it, and I got scared — and also I had too much pride wrapped up in owning a home. I would have been much better off renting, saving the money, and getting myself psychologically dis-entangled with him. Big mistake, and I own that.
However, the real issue is the cost-of-living in my area. It is prohibitively expensive to raise two children on my salary. My ex and his family know that, they know I didn’t have other sources of income, and they could have made it possible for me to have more financial stability, which is in the best interest of the kids. They chose not to do that.
You signed an IRS form called the 8332. Go to the IRS website and download it. Follow the directions exactly. In part III you can revoke the form. If you send it to him this year, you will be able to claim the children in 2013 and beyond. Let me know if you have any questions.
Thanks, Marie — I haven’t signed it this year but I will check out the site and the form. Great info for everyone in this situation!
I read it that you had signed the 8332 giving away the exemptions permanently. If so, this form would be filed with his tax return every year. Not to bore everyone with the details, but the IRS does not give a crap what anyone’s divorce decree says. The IRS has their own set of rules. More importantly, I am going to talk to our tax support team. I am curious if you subpeana his tax returns if they come from the IRS (what is filed) verses what would come from Prince (copies of what he claimed was filed). You can also get an IRS transcript which is a printout of all the information that the IRS receives from various sources (employers, banks, etc). I will let you know what I find out.
Hi Marie — He tried to get me to sign the forms into perpetuity, but I don’t think I did. Truthfully, I don’t remember because my brain got so addled during the custody stuff. But it’s good to know I can revoke them. Also, VERY good to get your perspective on the IRS. When I read the info on the IRS web site about the form it said in situations where parents have 50-50 the one with the higher income gets the exemption. Since the last I heard he’d made $3000 a year (LOL) that would be me. So either he’s too poor to pay child support (but I get the exemption) or he’s got enough money to pay support. Either way, I’d love to find out!
Divorces prior to 2009 do not need the Form 8332 if there is a signed agreement giving the non custodial parent the exemption for a child. If that is the case, and if the custodial parent decides to file the 8332 and decides to revoke the signed agreement, the IRS will permit this, but then the other parents can take the custodial parent to court for breach of the signed agreement if there is one. While taking this case to court, many also throw in any number of grievances and go for the jugular. Reading about Prince’s doings, I would think that is what he would do, and Pauline has to prepare for that onslaught. But if Pauline files the 8332 revoking any previous agreement or the same form previously filed, as far as the IRS is concerned, she would get the exemption. Marie is right that the IRS does not care about any outside agreements. That is between the two parties to fight in out in civil court. I doubt Pirnce will give up this exemption without a fight unless he has a lot to lose in court, and even then he might risk it on the chance that he could cause more damages to Pauline. The question is whether Pauline can afford and take and risk this battle
Thanks for your input, Catherine. According to our agreement, I was only obligated to give him the exemption until 2007. So I could have been asking for it the past several years and have no obligation to keep releasing it to him. The problem is, of course, that it’s ambiguous who gets it. And, yeah, we all know what his MO is when he doesn’t get what he wants.
No, it’s not ambiguous who gets the exemption.. YOU are the custodial parent, so you get the exemption every year unless you give Prince the exemption.
Read the IRS rules as to who gets the exemption, and it’s clear that you are the custodial parent for Frannie and Prince is for Lucas. Where it can be ambiguous is what your divorce agreements say about the exemptions. The fact that you did not take the exemptions in prior years along with a not so clear stipulation in the divorce agreement, allows him to take those exemptions. For this year, you can take the exemption and the IRS will give it to you, rather than to him.
However, if the divorce and other agreements are vague, Prince can go after you in civil court saying that you separately agreed to give him that exemption, and while he is at it, throw every little and big other issue into the mix, and he might as well.
Actually, as far as the IRS goes, unless you did fill out that Form 8332 or if the agreement is vague about the 2007 as the deadline for the end of exemption, you can go back and a redo taxes for 2012, 2011, 2010 with the exemption, though your returns those years might be something you want to let lie because you were married. But for 2013, not only the exemption, but the head of household designation can reap some significant funds for you.
If you KNOW that the agreement ends the exemption at 2007, I would file 2013 taxes with the exemption, and have a tax preparer, send a note saying that in absence of a 8332 or a signed agreement, Frannie is legally by IRS regulations your dependent and that you are eligible for head of household status, and that if there are any documents that show the contrary to send them. because that is the way you have to legally fill out the returns without such documents and you can’t find any. That keeps the emotional out of it, and sticks to the letter of IRS law. If Prince comes up with any paperwork that you signed giving him the dependent exemption for perpetuity, that you have forgotten about, then you have to renegotiate that. The tax preparer might also want to ask if there are any agreements covering prior years when Frannie was claimed by Prince incorrectly, and if he wants to do anything about this , because in absence of written agreements and/or form, you and Atticus should have been claiming her, resulting in more net taxes to the IRS if having her as a dependent on those returns had less of an impact because the income there is more, and the tax liability. In other words, the IRS would have made out with more taxes, had Frannie been correctly claimed. I would play innocent and dumb about all of this when you get the enraged phone call, and say you don’t want to redo all of the tax forms even tough it would result in returned money to you, since it would mean he would have to redo his a well, pay, the additional taxes that result with Frannie not his exemption and the interest and penalties as well, but going forward, you want to do things THE RIGHT WAY. Unless, of course, you and Atticus want to redo the past three years and get some refund for having Frannie as an additional dependent. My guess is that it would be net of about $1000 for those three years, and you can graciously say that because you did not catch the mistake either, Prince can keep that windfall. I say this because it would probably cost you more than that not only in trouble but could trigger and audit and who knows what Atticus had going in those returns with his own business. BUt that is up to you.
As for living within your means, yeah, that is important, and not doing so can used against you whereas not being able to afford a safe, nice place to live by definition cannot, as the court/judge would then being saying that a whole area is not fit for families to live, and clearly a lot of families live that way, and no congressman representing even the low down areas would stand for custody being given up because that area is not fit for kids. Poor people are allowed to have custody. Irresponsible ones are not. Poor dangerous areas are not designated as unfit when there are families living there, even though, yes, in reality they are. I know you were just hoping something would come up, but deliberately taking on a place where income and costs show ends could not mathematically make sense making another move inevitable is something that can be used against you and is pretty irrefutable. “Bad” and “dangerous” are subjective terms. The numbers are objective.
I’ve seen these “keep the money in the family” arrangements a lot, and I’m sorry to say, that they are pretty much iron clad if the attorneys and accountants are on them to make sure that all is in order. Prince is clearly a loser, and his family well knows this and is making sure that any stupid thing he does, not cost the family money a dime more than it has to. If a lawyer is offering to take this case on contingency, you know the odds are not good that any decent money is going to come out of it. But if you play this very well, you’ll get the exemption, and that could mean a couple grand less in taxes for you this year, and a nice check back for the IRS if you are withholding without this in consideration. So good luck. You have to play him, to get this, but I think you can.
Again, great info. I think you’re right, that the best way to play it is to just take the exemption without saying anything to him.
As for the housing situation, there just weren’t good options. Three-bedrooms in my old neighborhood, which was VERY transitional, were still pretty expensive. My ex would have flipped if I’d rented a one-bedroom and I couldn’t have put the kids in the same room. AND if I were living in a crappy part of town at some point they might have wanted to live full-time with their dad, who’s in the snazzy neighborhood with a pool. I do have some irons in the fire (extra money wise) which is part of the reason I took this place…
My mistake from the get-go was to let him pressure me into buying a house with him post-divorce. I had it in my head that I needed to own a house to have a real nest for my kids. Dumb. But coulda woulda shoulda doesn’t help.
I agree with everything Catherine said. My advice is pretty much the same. Make sure that you cover yourself by sending Prince the 8332 part 3 filled out before the end of this year. Only take the exemption if the divorce court and the IRS BOTH let you claim the deduction. There is no IRS 50-50 rule; the IRS does not recognize anything in your divorce decree including language like joint custody. The IRS is only interested in their rules which means literally who physically had the child. If you have your child 1 more day than your ex, then you get to claim your child by IRS rules. You have to be able to prove it if audited. They will look at things like school records, daycare logs, doctor’s records (residency) so make sure that you are listed as the custodial parent. Save and printout your emails. Although amending is an option that I was going to bring up when I commented, I again agree with Catherine. Finally, I am not sure if you do your own taxes or if you have a tax preparer, but you will save yourself a lot of heart ache if you file FAST AND FIRST. You will have to send him the 8332 by the end of this year. He will already know something is up. If you file electronically, the IRS will reject your return if he claims her first. If this happens, mail in your return. Do not take her off if you are entitled to claim her. It is easier to give the money back if the 8332 comes into play than get it later. Feel free to contact me for clarification when tax time rolls around.
THANK YOU, MARIE!
Rather than YOU sending Prince the 8332, let your tax preparer do so, and play dumb and innocent about this. (“Gee, I just said that, yes, I have custody of Frannie and you have custody of Lucas, and this is the way the law works is what I was told, unless there was some agreement and I don’t think we have anything beyond 2007. We should have fixed this a while ago, but that’s alright. I don’t want you to have to pay back the IRS for those amounts with taxes and penalties, only to get a lesser amount back myself for the back taxes, so you can keep that money. But let’s do it the right way from now on.”)
Yes, you should file your taxes as early as you can, because first come, first serve, and though the IRS would rule for you since Frannie is in fact in your custody and that’s all they care about, it’s better that you file and not have to argue and prove it to them. Because, then Prince would have to do the arguing and he would have to come up with a valid, current divorce agreement saying that he gets the custody for this year to counter. Make sure you do NOT have some agreement of this sort in your paperwork, because that is what could quash your claim. The IRS would still go for you if you indeed have more than 50% physical custody, but then you are wide open in civil court to be in contempt of that agreement if there is one.
My only difference from Marie is that I would have a tax preparer send the 8332 and do it when your taxes are filed, so it looks like you just found this out when having your taxes done, and oops, looks like you should have been claiming her and haven’t, so better let you know. I wouldn’t do it before the end of the year because that would tip him off. You probably can do it by the time W2s and other tax forms are due, and get your taxes done asap for this year.. No sense in telegraphing your punches.
Wow — such good information from you both. There really is nothing in the agreement about exemptions past 2007 so hopefully he won’t fight it.
The reason that I suggested completing part III of the 8332 and sending it to Prince before the end of the year is because there is some question as to whether or not Pauline gave away the exemption permanently. If she did, she will not be able to claim the exemption until tax year 2014 and beyond. Waiting until she files her taxes in 2014 for tax year 2013 will push back the time she can claim her to tax year 2015. I do like the strategy behind suggestion. The worst case scenario with mailing the 8332 at the end of the year then claiming her for 2013 is that the IRS will hold that portion of the refund if it is disputed by Prince, and the IRS will rule against you if you did sign the 8332. There is no way to figure out what was on the 8332 because it is filed with his return. I have to say that what really bites is that if he makes next to nothing in personal income (1040) and all his money comes from a trust (1041) then the exemption doesn’t even help him. It is money that could go to his child rather than kept with the IRS. He’s officially a tax a&s in my book. I will also caution that if they are funneling money to your daughter without your knowledge, and it is dispersed to her via the trust as K1 income, this could get quite messy. I would call the IRS and ask for your daughter’s transcript of activity for as far back as you need. You will need her SS# and DOB. If the in-laws think that you will never look, they might try it. Then as her legal guardian, you would possibly have cause to see the trust, and this comment is WAY outside of tax preparation knolwedge and into speculation on my part. It’s a long-shot back door approach. I’ll keep my fingers crossed for you.
I think what they do is give him X amount of money annually for each kid. He has a separate checking account for each. At least he did when we split up and I found the checkbooks hidden in his office. Also, they pay separeately for as much as possible, i.e. tuition which they can deduct from taxes on the family trust. I had no idea I could call the IRS and ask for a “transcript of activity” on my daughter! So much to think about!
There may not be any income reported to the IRS, but it pays to be thorough. Trusts are a pretty amazing way for the wealthy to pass on assets tax free. Good luck! I just started reading your blog. I really hate it when someone else’s ex makes my asshat ex look awesome;)
HA! Well, I’m glad I’ve accomplished that at least.
My guess: He’ll refuse to sign and you’ll have to take him to court and it will take at least 6 months and the judge threatening to jail him for contempt before he hands over any financials. During those 6 months he’ll have terrible business reversals and will be almost bankrupt. What a shock.
A good guess, Elizabeth.
Reading about your money troubles makes me sick…I just wish there were a way that your blogging could assist and you wouldn’t need a darn thing from the guy. Powerball, anyone?
I think I have better odds with Powerball than getting a decent deal with my ex.
I think he’ll fail to sign even when you say please and thank you, because this means HE won’t get that tax exemption anymore. But I think you are right to ask first then take it from there. Go, Girl. Grab your lady balls and go for it!
You can at least get the exemption every other year, which would be some savings. Legally, I think he has to do that.