OK - so the exwife told my husband that he could claim his daughter on our 2008 taxes. We also claimed her last year and in 2005. Nothing is stated in the divorce decree who gets the deduction, but there are 2 kids involved and in the past she has claimed one and us, the other. This year, she said we could claim the one child as we usually do. Well, she got into one of her moods and changed her mind. Only thing is, we already filed our taxes and received the return. She went to do her taxes electronically and obviously they were rejected. She's all up in arms now, saying that we had no right, even though she said we could claim her again. Stupidly, we didn't get anything I writing, but we are going to court in April and our attorney plans to have everything written into a court order (that he claims one child, she claims the other) including the fact that she said we could claim one child this year. I am just afraid that she is going to go ahead & file a paper return - then the IRS will audit us both. What are the chances that a judge would agree to write in the current year given the fact that she said we could claim her and we already did? Also, since my husband and I file jointly, our adjusted gross income is higher than hers (she is single, but lives with her boyfriend). We were told that judges tend to give the deduction to whoever has the higher AGI - is that correct to the best of anyone's knowledge? Because in that case, it seems he may decided to let my husband claim BOTH kids - which we didn't want to do. We think its FAIR that each parent claim one. What are the chances that we would be owing interest & penalities to the IRS for 2008?? :confused:

I am going to assume here that your husband is not the custodial parent. If there's nothing specified in the divorce decree or court order then the IRS will rule in favor of the custodial parent, meaning the parent with whom the child lives the majority of the time. If the child lives with each parent the same amount of time during the year, then the tie goes to the parent with the higher AGI (that may be the case you were thinking about).

I understand that there has been a verbal agreement that worked for you in previous years - but the IRS actually requires that if the non-custodial parent claims the child you attach a written decaration to your return, signed by the custodial parent, stating that the custodial parent will not claim the child. Obvoiusly that's not happening here. Bottom line is I think you're going to lose. Might be best to cut your losses and file an amended return before the filing deadline.

Fo reference see Pub 501 - page 13 talks at length about children of divorced parents.

http://www.irs.gov/pub/irs-pdf/p501.pdf