Tax Dependency Exemptions For Noncustodial Parents – It Is All About Form 8332
The dependency exemption seems to play a role in divorce negotiations out of proportion to its economic significance. The focus on Form 8332 by the IRS is probably reasonable tax administration, since they don’t really have the capacity to sort these disputes out. I understand the trend in some circles, is to have parents take turns claiming the exemption
You Do Not Have To File A Joint Return And There Are Some Reasons Not To
Filing a joint return for the last year of marriage is a reasonable course, if the couple is going to cooperate with one another. The problem is that couples who are really good at cooperating with one another are not among those likely to be getting divorced. Planners generally assume that the final return of the marriage will be joint. I think the more prudent thing to assume is that filing will be separate unless the case is made that the joint return saves money and, most importantly the balance due is being properly addressed. The respective audit exposure of the spouses also needs to be considered. Bottom line, though, is that you should never feel compelled to file jointly and particularly in a divorce situation should consider the pros and cons very carefully.
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Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.