Form 8332-A is a form created by the IRS for use in installment agreements. An installment agreement may be used to allow an individual to make payments on a tax liability over time or under terms set out by the IRS. The Agreement must include all of the following: A statement that it is made under section 1042 of title 26 (relating to collection and compromise procedures),
An explanation of what constitutes an installment agreement,
The schedule showing when each payment will be due with its amount, and
Details about any penalties attached if late payments are not paid by date shown on schedule. This guide provides an overview of this process as well as instructions for completing Form 8332-A correctly.

The “irs form 8332 pdf” is a tax form that is used to report income received from foreign sources. The form can be found on the IRS website.

What is IRS Form 8332-A Complete Guide

One of the most difficult subjects for divorced parents to address is child custody. A divorce spouse might battle over everything, from child custody to financial assets, in particularly bitter arguments. Tax advantages, on the other hand, may be a good place to start for divorced parents seeking for mutually beneficial alternatives.

Normally, the tax advantages are received by the custodial parent on behalf of their dependent children. However, there are situations when the custodial parent should let the non-custodial parent take advantage of the tax advantages.

That’s where IRS Form 8332 comes into play.

What exactly is Form 8332?

“Release/Revocation of Release to Claim to Exemption for Child by Custodial Parent” is the title of IRS Form 8332.

With a formal statement, the custodial parent may surrender their claim to any child or dependent related tax exemption under Section 152(e)(2) of the tax law. This written statement must include the following:

  • Be signed by the custodial parent, as required by IRS requirements, so that the kid is not claimed as a dependant for the calendar year.
  • Attached to the noncustodial parent’s tax return for the current year.

As a result, Form 8332 is used to make that written statement. But, before we go any further, it’s important to understand the distinction between the custodial and non-custodial parent.

Who has custody of the child?

The custodial parent is the parent with whom the kid spent the most of the year for tax reasons. The IRS defines this as the number of nights spent in bed throughout the tax year.

This may vary from the legal definition of custody as specified by the state.

The parent who spent 183 nights (or more) with the kid in a regular 365-day calendar year is naturally the custodial parent.

If the kid spent an equal number of nights with each parent, the person with the greater adjusted gross income is the custodial parent. In a leap year, this may happen (366 days). It might also happen if the youngster spends many nights with someone else (like a grandparent).

More information and exceptions are provided in IRS Publication 501 when one (or both) parents work at night.

Let’s speak about the tax advantages we’re talking about. What tax credits aren’t included?

What kind of tax advantages may be transferred?

When a marriage divorces, only one parent may claim a tax exemption (together with any associated tax credits) for each dependent child. That tax exemption normally goes to the parent who has custody of the kid, according to the law.

The tax deduction for a personal exemption has been eliminated as a result of the Tax Cuts and Jobs Act modifications. As a result, as a personal exemption, you obtain no tax deductions for the kid.

However, the parent may claim tax credits because of the child dependence exemption. The custodial parent must sign Form 8332 renouncing their claim to the credits in order for the noncustodial parent to profit from the credits.

Tax credits that apply

The following tax advantages are covered by Form 8332:

  • Tax credit for children
  • Additional credit for children
  • If appropriate, credit for other dependents

In other words, the custodial parent authorizes the noncustodial parent to claim those credits by completing Form 8332. However, just because a parent signs Form 8332 does not guarantee that the noncustodial parent would get those benefits.

Tax advantages are not included.

Form 8332 does not applicable to all situations. The following are some of the tax advantages that this tax form does not include, along with an explanation.

Credit for earned income

You do not have to have a kid to get the earned income tax credit, according to the guidelines (ETIC). You must satisfy the following fundamental requirements:

  • For tax year 2021, have earned income below the EITC level ($57,414).
  • Have less than $10,000 in investment income for the current tax year
  • By the time you submit your tax return, you should have a valid Social Security number.
  • Be a citizen or resident of the United States.
  • Do not submit Form 2555. (Foreign Earned Income Tax Exclusion)

You should also:

  • Have spent more than half of the tax year in the United States (not including Guam, Virgin Islands, or Puerto Rico).
  • By the time you submit your tax return, you must be at least 18 years old.
  • Not be reported as a dependant on the tax return of another family.

There are special considerations for military personnel, clergy, and disabled taxpayers.

Credit for child and dependent care

The IRS website states that only the custodial parent can claim the Credit for child and dependent care. This credit is not transferrable to the noncustodial parent.

And the credit may only be claimed by the custodial parent on behalf of an eligible kid. A kid must meet the following criteria to qualify as a dependent:

  • Be under the age of 13 or otherwise unable to care for oneself
  • Have received more than half of his or her assistance from one or both parents throughout the calendar year, if the parents are:
    • Divorced
    • Separated legally due to a divorce order or a separate maintenance decree
    • Separated on the basis of a formal separation agreement, or 
    • During the past six months of the calendar year, they had lived apart at all times.
  • For more than half of the year, the child was in the care of one or both parents.
  • Have a Social Security number or another kind of tax identification?

Filing status as head of household

A taxpayer must meet the following criteria to be considered head of household:

  • On the final day of the year, be single or considered single.
  • Pay more than half the annual cost of maintaining a property, and
  • Have an eligible individual reside with them for at least half of the year (unless that person is a dependent parent, which falls under special IRS rules)

If each person individually qualifies, both the custodial and non-custodial parent might claim head of household status. A non-custodial parent, for example, might claim head of household status if that person is responsible for another dependant (like an aging parent).

Let’s have a look at how to fill out Form 8332.

How to Fill Out Form 8332 Correctly

According to the IRS, each kid must submit a separate Form 8332. Form 8832 is divided into three sections.

The non-custodial parent’s name and Social Security number are typed at the top, regardless of whatever component (or parts) the custodial parent completes.

The top of Form 8332 contains the non-custodial parent's name and SSN.The name and SSN of the non-custodial parent appear at the top of Form 8332.

Let’s take a closer look at each section of the form.

Part I: Release of Exemption Claim for Current Year

This section is completed by the custodial parent in order to relinquish their claim to the kid exemption for the current tax year. At the bottom of Part 1, the custodial parent will sign, date, and attach their SSN.

The custodial parent fills out Part II of Form 8332 to allow the non-custodial parent to use the child exemption and applicable tax benefits for the current tax year.Part 1 is completed by the custodial parent to release their claim for the current tax year.

Part 2 must be completed by the custodial parent if future tax years are to be included.

Part II: Release of Exemption Claim for Future Years

This section is completed by the custodial parent in order to surrender their claim to the kid exemption for future tax years. The custodial parent may name particular tax years or simply write, “all future years,” according to IRS rules.

The custodial parent fills out Part II of Form 8332 to allow the non-custodial parent to use the child exemption and applicable tax benefits for future tax years.Part 2 is completed by the custodial parent to release their claim for future tax years.

At the bottom of Part 2, the custodial parent will sign, date, and attach their SSN.

Parts 1 and 2 must be completed if the custodial parent desires to abandon their exemption claim for the current AND future tax years.

Part III: Revocation of an Exemption Claim for a Future Year (s)

If the custodial parent decides to withdraw their earlier release of claim, Part 3 must be completed. The custodial parent might mention particular years, or simply write “all future years,” as in Part 2.

The cancellation, however, will only apply to future tax years, not the current one.

For example, Mary, a custodial parent, had already given up her exemption for the tax years 2018 through 2025. Mary chooses to renounce her prior release in 2022 by filing Form 8332. This revocation will be in effect from 2023 to 2025, but not in 2022.

Filling out Part 3 allows the custodial parent to revoke previous relinquishments of the child exemption.Part 3 is completed by the custodial parent to revoke earlier release for future tax years.

It’s critical to understand who must submit Form 8332 with the IRS in addition to correctly completing it.

Who is in charge of completing Form 8332?

In general, the parent seeking the exemption for the tax year will submit Form 8332 along with their income tax return. This form should be completed long before tax season begins. This will enable each person’s tax professional to comprehend the tax implications of their client’s circumstance.

If either Part 1 or Part 2 is completed, the non-custodial parent must attach Form 8332 to their tax return for each year in which they claim the exemption. If the custodial parent fills out Part 3, they must attach the freshly completed form to their tax return each year they claim the exemption.

Of course, keeping copies of each signed form with their tax records is a smart idea for both parents. That way, if anything comes up, they may talk to their tax advisor about it.

When does a custodial parent relinquish his or her exemption?

This might be something decided as part of a child support order, another court order, or a support arrangement. That, however, is beyond the scope of this paper.

Let we instead consider another question:

When does it make sense for the custodial parent to give up their exemption voluntarily?

Let’s pretend that both families want to save money on taxes. The parent with the greater income should generally seek the exemption. This will enable them to get the most out of the applicable tax credits. Not usually, however.

If the parent who would be eligible for the credit makes too much money, the credit may be phased away.

When a tax credit or deduction is phased out, it is progressively decreased in proportion to income beyond a specific level. After a certain sum, the credit or deduction is no longer available.

Tax credit for children phaseout

In 2021, there are two income-based phaseouts. The first phaseout, introduced as part of the American Rescue Plan bill passed in 2021, reduces the Tax credit for children from $3,600 to $2,000.

First Tax credit for children phaseout

It is for taxpayers with a modified adjusted gross income (MAGI) of more than:

  • If you are married and submitting a joint return, or if you are a qualified widow or widower, you may claim $150,000.
  • $112,500 if you’re filing as a single person; or
  • If you are a single filer or married and filing a separate return, your limit is $75,000.

Taxpayers who meet this criteria will see their Tax credit for children reduced by $50 for every $1,000 above the threshold. The phaseout is reduced to $2,000 for taxpayers whose MAGI exceeds:

  • $169,000 if you’re married and filing jointly, or $169,000 if you’re an eligible widow or widower.
  • $131,500 if you’re filing as a single person; or
  • If you are a single filer or married and filing a separate return, you may claim $94,000.

Second Tax credit for children phaseout

The second income-based phaseout for the Tax credit for children impacts high-earning taxpayers. Specifically, taxpayers whose MAGI exceeds:

  • if you’re married and filing a joint return, $400,000; or
  • All other filing statuses cost $200,000 each.

Taxpayers who meet this criteria will see their Tax credit for children reduced by $50 per $1,000 above this threshold until reduced to zero.

Phaseout of the Child and Dependent Care Tax Credit

The income phaseout for this tax credit is discussed in IRS Publication 503, Child and Dependent Care Expenses. The tax credit is usually calculated as a proportion of the cost of care. 50 percent of the cost is considered full credit.

For example, if you spent $4,000 on child care in 2020 and were eligible for the full child care tax credit, you would get $2,000, or half of the cost of the service.

This phaseout is not a dollar value, as in the Tax credit for children, but a sliding percentage based upon income. Based on the tax law changes in the American Rescue Act, this phaseout starts at $125,000 (for all taxpayers, except for married couples filing separately), and ends at $438,000.

The instructions for IRS Form 2441, Child and Dependent Care Expenses, include the whole phaseout timeline for this tax benefit.

Conclusion

It’s critical for both former spouses to be on the same page in a divorced relationship. Knowing how to complete Form 8332 will assist both parents in reporting their child’s tax exemption status to the Internal Revenue Service.

This article, however, does not provide tax, financial, or legal advice. It is simply intended to provide general information. Before going further, you should talk to your financial, tax, or legal office about this.

The “form 8332 consequences” is a form that people need to fill out if they are receiving a refund from the IRS. This guide will help you understand how this form works and what its consequences are.

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  • form 8332 instructions
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  • how to file form 8332 electronically
  • is form 8332 mandatory
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