@bk1231 wrote:
I understand who is custodial and who is non-custodial, only now after the form has been filed. I'm trying to understand what harm or incorrect information would be at stake when we have been claiming the child every other year per a court order. I didn't realize until this year, after filing, that I should not be listing myself as non-custodial. If the non-custodial parent has been listed as custodial on form 8332, what would the issue be for me since it basically states that I am able to claim him for 2020. Does the IRS use custodial information for the stimulus checks or does it use the claim for dependency?
Let me add some more here because I'm still not sure I have grasped what you have been doing.
1. In any year when you are the custodial parent and it is your turn to claim the child, you don't use form 8332. You indicate in Turbotax you had custody more than half the year, and you are not releasing the dependent. You get the full benefits package; head of household, EIC, dependent care credit, $2000 credit, and for 2020, the recovery rebate.
1a. If you told Turbotax that you had custody for 9 months, but you also mailed the IRS a form 8332 that was signed by the other parent where it says "Signature of custodial parent releasing claim to exemption" and "Custodial parent’s SSN", this could raise a red flag. If the IRS sends you a letter asking for an explanation, you will need to explain as clearly as you can, and include proof the child lived with you more than half the year.
1b. If you told Turbotax you had custody less than half the year, you may have paid too much tax, and you may want to amend.
2. In any year when you are the custodial parent and it is the other parent's turn to claim the child, you will still tell Turbotax that you had custody for 9 months, but you are releasing the dependent. You give the other parent a form 8332 signed by you as custodial parent. You will qualify for HOH and EIC (if you otherwise qualify) but not the $2000 child tax credit. If you told the Turbotax program you had custody less than 9 months, you may have paid too much tax and you may want to try preparing an amended return to see if you are eligible for an additional refund.
The bottom line for form 8332 is that only the custodial parent can sign the form, and the custodial parent never attaches a form 8332 to their own tax return. Form 8332 is only signed by the custodial parent and given to the non-custodial parent and only when it is the non-custodial parent's turn to claim the dependent.
