To Haiku and Kat,
Ok...I am an accountant and a tax preparer. Yes, state court judges make many rulings regarding tax exemptions even though technically they do not have the jurisdiction to do so. They do so because nearly no one will appeal their rulings. If they have the kind of money that allows them to pay the high cost of the appeal, the tax exemption is usually no longer of any serious value to them. The child tax credit phases out relatively early, and the exemption by itself isn't worth the cost of the appeal. (It would cost more to appeal than they would get back over the entire course of the child's childhood in many cases).
In Haiku's case the judge certainly did have the power to reduce the child support because mom wouldn't obey his order regarding the taxes. It was within his jurisdiction to decide a child support amount. However its possible that he/she could have been overturned on appeal.
However in Kat's case the judge made two blatantly illegal rulings. He ordered her to amend her tax returns, which he not only had no power to do, but he ordered her to amend them in a way that was contrary to the IRS regs, therefore contrary to federal law. In addition he ordered her to sign a form 8332, which again he had no power to do.
She could have appealed that and won...easily. However its probably too late now unless she is still within the deadline to appeal.
There has been some recent case law (tax court, not civil) indicating that the IRS may no longer honor state court rulings. There is some scuttlebutt that the IRS will decide to only accept actual AGREEMENTS which would contain the custodial parents signature, or a freely signed (uncoerced) form 8332. It sounds like the judge in the case Kat presented realizes that, to at least some extent, since he is trying to force her to sign the form, however forcing her to sign it isn't the intent of the regs.
Basically, the IRS has lost control of the situation which is causing some really serious problems and cost in tax collection and feels that its necessary to take back the control that belongs to their agency, NOT to the state courts. I have no doubt that if they decide to do that, that the regs will also be "fine tuned".
The IRS used to "hold" a second return that came in claiming the same child as an exemption. The IRS now no longers does that because is bogged down the system so badly. Now they process the second return but send letters out instead encouraging the parent who filed incorrectly to amend their return. They will still catch up with the parent who doesn't qualify for the exemption under the regs, but they will take their time doing it....which will make the interest go up, and will gain the government more money.
