@sunshine rainbows wrote:
That is what I thought but even if he were to take me to court (which would cost more than the "credit" he would get) I can only provide him with 3 years to amend a return correct? 3 years if he got a refund, 2 if he owed?
Yes, however, the court can order various remedies including that you file differently in the future.
Let me first explain the rules.
Only the parent where the child lives more than half the year can automatically claim the child as a dependent. If the custodial parent transfers the dependent claim to the other parent using form 8332, that other parent can claim the child tax credit and dependent exemption (for 2017 and earlier) but can never use the child to qualify for earned income credit, head of household status, or the child and dependent care credit for day care expenses. Those benefits always stay with the custodial parent and can't be waived, transferred or shared.
Now, it seems as though you were required by your court order to give your ex a form 8332 for the past 6 years, allowing your ex to claim one of the children. Because you did not do this, your ex was denied roughly $2000 per year in tax benefits, although the exact amount could only be determined by re-calculating all their past tax returns. You may have claimed the same amount in excess benefits, although again, someone would have to examine all your returns to see what the actual benefit was.
As you seem to already know, your ex can't file amended returns more than 3 years old (a 2017 amended return must be filed by April 15, 2021, and he can also amend for 2018 and 2019). This won't correct the older errors. And you would also have to amend your returns and possibly repay a considerable amount of money.
A court could do anything to fix this problem except order you to file a tax return that violates federal law. For example, if the deficiency was $12,000 ($2000 x 6 years), the court could reduce your future child support payments until the deficit is made up. Or the court could order you to surrender both dependents for 3 years (2017-2019) instead of 1 dependent for 6 years. Or the court could order you to surrender both dependents for future years until you come out even. The court is not going to want to deprive you or your children, so as long as you propose a reasonable solution, the court is not likely to demand you repay an impossible sum immediately, but if you are unreasonable, the court is more likely to be unreasonable towards you. And you are the one who received 6 years of improper benefits, even if it was through accident or ignorance instead of malice.
Because of the amount of money involved, you need to get your attorney involved right away, if they aren't already. Your attorney could hire a neutral accountant to review your and your ex's tax returns, determine the amount of the deficiency, and propose a solution. It is to your advantage to educate your ex on what they can and can't do, and offer a reasonable compromise.
From an income tax point of view, if you must amend your own returns, be sure to still indicate the children lived with you more than half the year and you are using form 8332 to release the dependent to the other parent. This will ensure you retain any EIC or HOH benefits the child entitles you to, even though you must waive the child tax credit.
