Posts Tagged ‘child support’

Can I claim my child support as a deduction?

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child support as tax deductionAs the time advances toward Tax Day, one of the first questions divorced parents ask is, “Can I claim my child support as a deduction?” Afterall, after spending considerable amounts for the care of children, there has to be some way to get a tax break. Unfortunately, that break won’t come through a deduction of child support. Why?

The IRS does not consider child support to be tax deductible. Child support also is not taxable income and does not have a line item under itemized expenses. However, alimony or spousal support is considered taxable income and expenses related to the collection of those payments are tax deductible.

For the person paying child support and alimony, the IRS does allow tax deduction to be taken for those whose divorce decree wraps those two payments up into “family support” or for those who remit the child support as alimony. The recipient, however, must report this as taxable income. As a word of caution, if alimony is scheduled to end within six months of the child’s 18th or 21st birth date, the IRS may suspect the alimony is disguised child support.

All is not lost. While child support is not taxable income or deductible, being able to claim a child as a dependant does impact tax liability. Only one parent can take the dependency exemption and file as “head of household”. A divorce decree or IRS determination will establish who can take this exemption and get the subsequent benefits.

There are other expenses related to the care of children that do also allow for a tax break. Custodial parents may be able to take child care credits. For parents who have a dependent under the age of 17 and incur work-related expenses, the tax credit can apply to a portion of these costs. Noncustodial parents have the benefit of deducting certain child care and medical fees for minor children. Although the Tuition and Fees deduction has been eliminated for older children, parents of undergraduate students can take the American Opportunity Credit for up to $2,500 for each eligible child.

There are negative tax implications if a person does not pay their child support. If a person fails to pay child support, they may lose their tax refund. The Bureau of Fiscal Services can withhold a portion or all of a tax refund in an effort to collect delinquent child support payments. This is done exclusively under the Treasury Offset Program and if this is to occur, the BFS will provide details on the original refund amount, the amount withheld and information about the agency collecting the payment. If a couple filed jointly but were impacted by BFS action to recover unpaid child support, they may file Form 8379 to request a portion of the withheld payment back from the IRS.

Whereas child support is not able to be claimed as a deduction, there are ways to get tax credits or benefits to offset the costs of caring for dependent children. Whether through a family support agreement, dependent exemptions, or claiming deductions and tax credits on child care, education or medical expenses, divorced parents can benefit from available provisions to tax relief.

To speak with our attorneys, who specialize in both tax and divorce, please call our Modesto office at (209) 492-9335.

The Tax Benefits of Alimony

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Tax time is filled with W-2’s, receipts, and calculators, and with taxpayers working feverishly to report income, pay required taxes, and claim their maximum deductions by the deadline. This time of the year is improved if there are tax breaks or a large refund on the way. For those who went through a divorce in the previous tax year, there are some things that can be added as deductions and beneficial to both spouses. Let’s dig into alimony and see how this affects divorced ones at tax time.

For the payee

Although divorce carries fees for court filings, attorneys or other counsel, those typically are not tax deductible. However, under some circumstances, a spouse can deduct fees associated with the collection of alimony fees. The person seeking alimony payments–either wives or husbands–can deduct fees that were incurred during the process of trying to obtain payments from their spouse. These fees will be filed on tax Form 1040 Schedule A as a “Miscellaneous Deduction”.

Alimony payments are considered taxable “earned income” for the payee. This comes with some restrictions. For example, the itemized deductions has to be at least two percent of the adjusted gross income for the spouse that is seeking alimony payments from their ex. If they do not itemize deductions or the deductions do not meet the required percentage, the spouse is unable to take claim it.

The kinds of fees that are able to be deducted include those for tax advice, the costs for legal services to receive spousal support, and fees for securing interests in a retirement plan. Also, since some counseling is not considered deductible, if an attorney provides these non-deductible services, these must be billed separately from other services that are deductible. Additionally, if alimony payments are in the first year or two after the divorce, these may be considered a non-deductible property settlement.

For the payer

The person paying alimony may claim it as an “above-the-line” tax deduction if they meet IRS eligibility. Some prefer this over paying property settlements because of its tax benefits. The payments must be made under a legal separation agreement or divorce decree, not voluntary or made by persons living in the same household. The payments are not considered child support, the payments must be made by cash, check or money order and these payments cease after the payers death. These payments should be reported on Line31a of the payers Form 1040 along with their spouse’s social security number so as to not have this deduction cancelled and penalized.

Some have paid child support payments as alimony in order to save on taxes. While this is allowable by the IRS, if it resembles child support, it may not be entirely deductible. Especially if alimony is scheduled to end by within six months of the children’s 18th or 21st birthday will payments be suspicious and disguised child support. The IRS also becomes suspicious if alimony payments are below the threshold of excess alimony within the first two to three years of the divorce.

Alimony payments have benefits both to the one receiving spousal support and the one paying it. To get tax deductible help with alimony and tax planning, contact our offices.

How Can You Prepare For Divorce

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How can you prepare when divorce seems imminent? Since divorce is not only a dissolution of a marriage but a splitting of finances and assets and potentially a custodial battle for children, it’s helpful to plan your steps well ahead of making a move to end your union. Here are five steps you can take now to assure the smoothest outcome in your divorce proceedings.

How to be mentally prepared for divorce

The best way to prepare mentally for divorce is to accept that it is happening. If all other efforts to make your marriage work have failed, understand that while you may not want this to happen and it may not feel right, this is your predicament. Start to seek out emotional help from friends, a support group, and a therapist. Do not resort to confiding in or talking badly about your spouse to your children or on social media.

How to be financially prepared for divorce

As soon as it becomes clear that things are heading south, start getting copies of your family’s financial documents, including you and your spouse’s paycheck stubs, tax filings, bank statements, receipts for purchases, and records of expenses and debts that will need to be provided to your lawyer.  Prepare to amend wills and beneficiary designations on insurance policies to make sure that your spouse is no longer named in these. Open a separate bank account, remove your spouse’s name from credit cards and start saving money.

It is a good time to start budgeting for your life without your partner and to pay down debt while there are still two incomes. Cutting expenses and increasing income will need to become a priority. The sooner you replace your spouse’s income, the smoother your transition.

How to prepare for divorce when you have children

A big concern for those who are divorcing with children is who will get custody. To support your position on the matter, be sure to document who is involved in the daily care of your children. Obtain school logs to show who is involved in picking up the children, parent-teacher meetings and extracurricular activities. Since many parents are granted custody based on who is physically present in the home with the children, it may be advisable not to move out. In the case of any danger to the children, be sure to get police reports of past incidents or other records to establish any risk to their safety.

How to get the right divorce help

There is ample divorce help available to prepare you for what is to come. Divorcée Helen Thabile states, “I researched the laws in my state, checked out the online resources that the local court offered, then I hired a lawyer.” Start by establishing which state where you will file your divorce, as your state of residency may not have jurisdiction over your marriage. There are also instances where another state has better divorce laws.

Research lawyers, seek out recommendations from friends and family, and consult few of divorce attorneys to get a feel for who will be right for you. Some consider a mediator if things are likely to be amicable. Once you’ve retained a lawyer, be sure to be organized, provide them what they need before deadlines and be proactive.

What happens after the divorce is filed?

After the divorce is filed, make sure you follow the direction of your lawyer and the courts to assure things are done thoroughly and in a timely manner. Make sure the emotional, physical and financial well-being of you and any children are cared for during this time. Most of all, plan for your future so you can anticipate great things moving forward.

Nobody looks forward to going through the divorce process. If you need help as you prepare for the dissolution of your marriage, reach out to us today. Our divorce attorneys at the Thomas Hogan Law Office Modesto can assist you.

Child Support: Termination and continuation beyond age 18

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In the start of a family law case with minor children, the parties often devote much attention to establishing an amount for child support.  In almost all cases when parents separate the court will institute an amount of support payable by one part to the other for the parties’ children.  This ordered support continues until support is modified by the court or terminated by law.  This article addresses those circumstances which give rise to the termination of child support and circumstances which may allow it to continue into adulthood.

Termination of Child Support

As a matter of law there are certain conditions which terminate an obligation to provide support for a child.  Generally child support will end when:

  1. The child dies.
  2. The child is emancipated.
  3. The child gets married.
  4. The child is adopted terminating the parental rights of the supporting parent.
  5. The child reaches the age of 18 and is no longer a full time high school student.
  6. The child reaches age 19 (regardless of whether the child is still in high school or not).

Absent certain exceptional circumstances if one of the terminating conditions listed above occurs, child support terminates as an operation of law.  After such happens the parent receiving support is obligated to notify the parent paying support and is obligated to refund any support paid after support obligation terminates.

Child Support into adulthood

The court can in certain circumstances, as listed below, order that support for a child continues into adulthood.  However, if these circumstances do not exist the court lacks the authority to continue child support.

Support to pay for colleges

While some states have instituted laws that require parents to chip in for their adult child’s college education, California has not done so.  The court cannot order a parent to contribute to an adult child’s college expenses over that parent’s objection.  However, the parents can agree to pay for a child’s college education, whether informally or as a court order, and if made into a court order the court can enforce that agreement according to its terms.  Absent such an agreement, a court order to pay for an adult child’s college education expenses is invalid and is beyond the court’s authority.

Support for adult disabled children

Family code 3910(a) creates an obligation for a parent to support “a child of whatever age who is incapacitated from earning a living and without sufficient means”.  The courts have generally imposed a support obligation under this statute when the facts or circumstances indicate that the child has a physical or mental disability which prevents them from being able to work if they chose to do so.  In cases where a now adult child has such a disability a careful examination of the facts is needed to determine the child’s vocational interests and their ability to work (whether with or without accommodations).   Cases dealing with support for adult children who may be disabled are incredibly complicated and fact specific and should not be undertaken without legal assistance.

If you have any questions regarding child support and its termination please contact our office and set up a time to meet with our attorneys.

Can the court include income of my new spouse in calculating child support?

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The fundamental purpose of child support in California is to ensure that the needs of children are provided for.  Under California law each parent has an obligation to financially support their children (Family Code §4053(b)).  Practically, the state has adopted a uniform guideline formula to calculate the amount of support that should be paid keeping in mind each parent’s obligation to support their child.  Simply speaking, the guideline formula calculates support based upon each parent’s income and the amount of time each parent has with her child.

To ensure that a child is supported, in the appropriate case the court may count a new spouse’s income in calculating support.  However, under the law a new spouses’ income should not be considered except in an extraordinary case (Family Code §4057.5(a)(1)).  The family code lists examples of these extraordinary cases, including when a parent “voluntarily or intentionally quits work or reduces income” or when a parent “intentionally remains unemployed or underemployed and relies on a subsequent spouse’s income” (Family Code §4057.5(b)).  The law recognizes that in this case it is appropriate to use a new spouse’s income to calculate support so that the entire burden for supporting a child does not fall on the parent who is still working.  (Marriage of Paulin (1996) 46 Cal.App.4th 1378, 1384, fn. 5).

It is important that if you are facing these issues that you contact an experienced family law attorney to ensure that child support is set in an amount that is fair and proper.