First, I will explain the rules because many people seem not to know them, including some lawyers and judges. At the very bottom, I will directly answer your question.
The IRS doesn’t care about and is not influenced by court orders, currency on child support, drug tests, or any of the other back-and-forth issues in your state court. They simply don’t care. Under IRS rules and federal tax law, the only parent who has the absolute right to claim a child as a dependent is the parent where the child lives more than half the nights of the year. This is the “custodial parent“ in IRS language and has nothing to do with any custody order. There is no such thing as 50-50 custody because in most years, there are an odd number of nights and one parent must have custody more nights than the other parent.
If you are the parent with custody more than half the nights of the year you have the absolute right to claim your child as a dependent. If you decide to release the dependent claim to the other parent, you must give the other parent a signed form 8332 dependent release. In TurboTax, you would indicate that the child lived with you more than half the year but that you are releasing the dependent with a signed form 8332. TurboTax will still allow the child to qualify you for head of household, EIC, or the dependent care credit, because these tax benefits always stay with the parent who has custody more than half the year and can never be waived, transferred, or shared. The other parent would indicate in their tax program that they had custody less than half the year and they are claiming the child because they received a form 8332. The other parent will qualify for the $2000 child tax credit but no other dependent benefits. The other parent will be required to mail the original signed form 8332 to the IRS within three days after e-filing the rest of their tax return.
If you have not previously been using form 8332 and filing in this way, then you may have been denying yourself certain tax benefits and you may have been allowing the other parent to claim certain tax benefits they were not entitled to.
Going back to IRS regulations, as I said, the IRS does not care whether or not you sign form 8332. It is your right to claim the child if the child lives in your home more than half the year. However, the state court can enforce its order and force you to sign form 8332, or find you in contempt, or modify the custody order in such a way as to punish you, if the court has ordered you to sign the form and you refuse. You should not refuse to follow a court order without competent advice from your family law attorney.
