Four Child Tax Exemption Tips for Divorced or Ex-Couple Parents

Many divorced couples iron out arrangements to "share" the right to claim their children on their federal income tax return. One common arrangement is for the parents to take turns claiming the child(ren) on alternate years. While this should be simple and easy to remember, mix ups can occur, and when they do the Internal Revenue Service will not play family court to iron out the kinks.

If you have an arrangement with the other parent of your child(ren) to share the tax exemption, here are four tips to keep mix ups from occurring.

1. Seal the deal with a court order.

Even the most amicable divorced or ex-lover relationships can have rough patches. To take the emotions out of the tax time exemption discussion, have a court order on file detailing the arrangement. This keeps everyone honest by removing the temptation to use the exemption as leverage, to violate the original "spoken" agreement, or to unknowingly (or knowingly) have both parents claim the kid(s) for the same tax year.

2. Review the arrangement every year.

Even with the court order on file, a short discussion should take place confirming whose year it is to claim the child(ren) and allowing the parent who is claiming to specifically state that he or she will be doing so, per the court order.

3. If it's your turn, claim the exemption(s)!

This may seem like a no-brainer, but for single parents, other tax credits and breaks may nullify the need to claim the child tax credit (such as head of household exemptions, earned income credits - see the IRS.gov website for further examples). The information for the child tax credit can still be included on the IRS forms. If the exemption is not allowable, the fact that the parent included the child(ren) on the tax form in the year designated by the court order will be recorded, thus helping to eliminate confusion in future years regarding whose turn it is to claim the kid(s).

4. Turn in Form 8332 every year, even if you aren't the claimant!

Form 8332 is the Release of Claim to Exemption for Child of Divorced or Separated Parents. This form is typically signed by the custodial parent, since they are the parent "giving up" the exemption for the years specified on the form. If each parent turns in the form every year, confusion will be greatly reduced for both the parents and the IRS. Should both parents accidentally claim the child in question, then Form 8332 will tell the IRS whose tax form is correct, according to the court order.

Taxes and divorce are two convoluted processes, but by securing a court order and IRS Form 8332, divorced or ex-couples who share one kid, or ten, should be able to navigate their yearly 1040 with ease.