Many tax preparers misinterpret court orders and tax law when preparing tax returns. Since 2009 the IRS has taken the position that a county court cannot tell the IRS how exemptions are claimed on a tax return. Attaching copies of a divorce decree are not sufficient to claim the exemption on a child who does not live with you.

Basicly, the parent who has the child in their home for more than half the year and provides 50% or more of the support (this does not include child support) is the parent that can claim the child as a dependent. The dependency can be released to the noncustodial parent if the custodial parent signs form 8332. The noncustodial parent must then attached form 8332 to his tax return. If you are a noncustodial parent, make sure to have the custodial parent sign 8332. If form 8332 is not attached to your return, it can cost you later.

One area where I commonly see mistakes for custodial parents is with the Earned Income Tax Credit (EITC). The noncustodial parent is not eligible to claim the EITC, since their child did not reside in their home 6 months or more. Even if the child dependency is released to the noncustodial parent, the custodial parent is eligible to claim EITC if they have earned income. The custodial parent may even be eligible to claim head-of-household filing status. In cases where the parents have joint custody, there are many factors that the tax preparer has to examine before determining who is eligible for the EITC.

I always request a copy of the court documents.