In Arizona, the parents' child support order will designate which parent claims the child(ren) for the yearly tax dependency exemption. If the child support order allows for the obligor (parent who is paying support) to claim the child(ren) for the upcoming tax year, the obligor must ensure that he or she is current with his or her monthly obligation and all ordered payments on arrears by December 31st. If the obligor is not current on their obligation and any ordered arrear payments, then the other parent has the right to claim the child(ren). In such a scenario, the parties should execute Form 8332 from the IRS clearing the way for the other parent to claim the child(ren).
Tax Filing during a dissolution
Sometimes, the dissolution process is such that the parties are still progressing with settlement negotiation during the tax season or it does not appear resolution will come after the tax filing deadline. In these situations, the parties can discuss whether it is appropriate to file taxes jointly or separately. If you are represented by counsel, you should discuss this with your attorney before deciding. But here are some items to consider when determining how to file:
1) Is there a tax benefit to filing jointly or separately? Are the parties going to receive a larger refund if they file jointly, if so, they might want to consider filing jointly one last time. If you do, make sure there is an agreement as to how the refund is to be divided.
2) If there is a refund, where will it go? If there is a liability, who is to pay? If the parties receive a refund, sometimes it is beneficial to use the refund to reduce community debts. If there is a liability, the parties will want to agree on how to split that debt.
3) Can we work together? Compiling the necessary documents to complete joint taxes requires communications between the parties. If communication is difficult, filing jointly will be difficult.
4) Should a third party complete and file? Regardless if the parties can or cannot communicate, it is often more efficient for a tax professional to complete taxes and maximize the parties' return or limit their exposure. If the parties can agree to a third party professional and who will pay, this may be an efficient option that limits issues of claiming correct amounts.
Please note that Curry, Pearson, & Wooten, PLC is not a tax law firm and the information above should not be considered legal tax advice. If you have a legal tax question, call our office at (602)258-1000 and our experienced Family Law Attorney will happily refer you to a tax professional.