Advice on Claiming Tax With Child Support Balance

Tax Refund Offset Program: If your husband owes back child support, any federal tax refund you file jointly with him may be intercepted (offset) by the government to pay down his arrears. This happens automatically if the state has reported his arrears to the Treasury Department.
Joint Tax Returns: If you file jointly, your portion of the refund could also be intercepted. However, you can file IRS Form 8379 (Injured Spouse Allocation) to recover your portion of the refund that isn’t tied to the arrears.

The right to claim a child as a dependent for tax purposes depends on IRS rules and the custody agreement:

The custodial parent (bio mom) is usually entitled to claim the child as a dependent unless they sign IRS Form 8332, releasing the claim to the non-custodial parent for a given tax year.
The custody agreement in your case allows for alternating years. For you to claim the child, bio mom needs to sign Form 8332 for your husband in the years he claims the child.

Impact of Arrears on Claiming the Child:

Even if your husband is entitled to claim the child under the custody order, the tax refund offset for back child support will still apply if he is owed a refund from claiming the child.

If you propose claiming the child every year with an agreement to share the additional tax refund with bio mom:

Legally Binding Agreement: Ensure this is formalized in writing, preferably with legal counsel involved, so bio mom cannot later contest it or claim the child herself.
IRS Compliance: Make sure bio mom signs Form 8332 for the years she agrees to give up the exemption.

Caution:

If you claim the child without a signed Form 8332, and bio mom also claims the child, the IRS will flag both returns for review, which could lead to complications.
Depending on the state, sharing a refund tied to child support or tax credits could raise questions if the arrears are still unpaid.

Court Approval: Colorado family courts generally allow parents to modify custody and tax arrangements if both parties agree, as long as it’s in writing and doesn’t violate state laws.
Paying Arrears: Any extra refund your husband receives could be used to pay down the back child support more quickly, reducing potential offsets and helping to rebuild trust with the court and bio mom.

Consult a Family Lawyer: Discuss the proposed arrangement with a lawyer to ensure it complies with Colorado state law and won’t unintentionally cause legal issues.
Use Form 8379 for Joint Returns: If filing jointly, file Form 8379 to protect your share of any tax refund from being intercepted.
Formalize the Agreement: If bio mom agrees to let your husband claim the child yearly, get it in writing and ensure Form 8332 is signed annually.
Focus on Arrears: Use any additional tax refund (or part of it) to reduce the arrears. This will help eliminate the risk of offsets in future years and improve your husband’s standing in court.