I don’t know how many judges, lawyers, tax preparers, and divorced parents are aware of the Treasury Department/Internal Revenue actions to take charge of income tax issues related to child custody and the right to claim a child as a dependent for tax purposes.

 

Under the new “Treasury Regulations, Subchapter A, Sec. 1.152-4” that became effective July 2, 2008, a custodial parent can 'unilaterally' revoke an earlier release of a dependency, and even if the divorce papers clearly state that the custodial parent must release the right to claim a designated child as a dependent. Prior Form 8332 that the non-custodial parent relied upon to claim a child as a deduction on their income tax return is no longer permanent. 

 

It is possible that this new regulation change will add additional litigation for our overloaded courts. Child support and other parent obligations often create tensions between the custodial parent and the non-custodial parent. This regulation change is going to add additional fuel to already tense relationships. It is reasonable to believe that a custodian parent will use this regulation change to help enforce payment of child support and other agreements related to the child. It is also, possible that they fail to consult an attorney, before they revoke the Form 8332 Agreement. However, before a custodial parent makes this choice, they should consider some of the possible consequents. Depending upon a court agreement, the custodial parent could find himself or herself in court trying to defend a violation of the agreement. They may even be forced to pay the non-custodian parent’s legal fees, along with their difference in tax obligations. Only an attorney familiar with the divorce agreement is going to be able to properly advise the custodian parent.