Tag Archive | "Child Support"

When Going Through a Mediation, Divorce, Child Support, or Paternity Action Make Sure You or Your Attorney are Aware of These Issues

By Richard Mann, Richard A. Mann, P.C., Indianapolis

People going through divorce, paternity, or child support matters may make decisions that unknowingly have significant financial affect upon them. Under Indiana Law child support orders are required to address the dependency exemption for children.   See I.C. 31-16-6-1.5 which states” (a) A court shall specify in a child support order which parent of a child may claim the child as a dependent for purposes of federal and state taxes.

(b) In determining which parent may claim the child as a dependent under subsection (a), the court shall consider the following:

(1) The value of claiming the child as a dependent at the marginal tax rate of each parent.

(2) The income of each parent.

(3) The age of the child or children and the number of years that the child or children could be claimed as a dependent or dependents.

(4) Each parent’s percentage of the costs of supporting the child or children.

(5) If applicable, the financial aid benefit for postsecondary education for the child or children.

(6) If applicable, the financial burden each parent assumed under the property settlement in a dissolution proceeding.

(7) Any other relevant factors.”

Many people think the custodial parent receives the exemption.  That is the default under federal law if the order is silent.  Along with the dependency exemption there are other considerations such as head of household status especially in cases with equal parenting time, lifetime learning credits, child care creditunder 17 child credit, etc. As far as the child care credit, a number that goes into the child support calculation is the cost of child care.  A little known or used provision of the Indiana Child Support Guidelines states as follows: In circumstances where a parent claims the work‑related child care credit for tax purposes, it would be appropriate to reduce the amount claimed as work‑related child care expense by the amount of tax saving to the parent.  The exact amount of the credit may not be known at the time support is set, but counsel should be able to make a rough calculation as to its effect See commentary 3E1. What this means is that number could be reduced by the tax benefit by the custodial parent therefore reducing the child support. This may be fair as the non-custodial parent’s support includes a percentage based upon the relative income and pays the child care with no tax benefit.

I regularly am involved, when I mediate, when one or both parties are not aware of these provisions or the effect upon their case.  Many lawyers have not taken a tax course or it has been many years since they did.  In today’s family law setting you must be aware of many areas of law, since as explained above, tax could have a significant effect on your case, understanding of pensions and retirement may be a part of divorce, businesses may need dividing, social security benefits (the difference between SSI, SSD and SSR), food stamps, vouchers, employer provided health insurance, and bankruptcy is often a possibility in such matters.

The following article is an article from the IRS outlining many tax considerations.  Summer Camp may even qualify for the child care credit.

Many parents send their children to summer day camps while they work or look for work. The IRS urges those who do to save their paperwork for the Child and Dependent Care Tax Credit. Eligible taxpayers may be able claim it on their taxes in 2018 if they paid for day camp or for someone to care for a child, dependent or spouse during 2017.

Here are a few key facts to know about this credit:

  1. Qualifying Person. The care must have been for “qualifying persons.” A qualifying person can be a child under age 13. A qualifying person can also be a spouse or dependent who lived with the taxpayer for more than half the year and is physically or mentally incapable of self-care.
  2. Work-Related Expenses. The care must have been necessary so the taxpayer could work or look for work. For those who are married, the care also must have been necessary so a spouse could work or look for work. This rule does not apply if the spouse was disabled or a full-time student.
  3. Earned Income. The taxpayer — and their spouse if married filing jointly — must have earned income for the tax year. Special rules apply to a spouse who is a student or disabled.
  4. Credit Percentage/Expense Limits. The credit is worth between 20 and 35 percent of allowable expenses. The percentage depends on the income amount. Allowable expenses are limited to $3,000 for care of one qualifying person. The limit is $6,000 if the taxpayer paid for the care of two or more.
  5. Care Provider Information. The name, address and taxpayer identification number of the care provider must be included on the return. The childcare provider cannot be the taxpayer’s spouse, dependent or the child’s parent.
  6. IRS Interactive Tax Assistant tool. Use Am I Eligible to Claim the Child and Dependent Care Credit? tool on IRS.gov to help determine if eligible to claim the credit.
  7. Dependent Care Benefits. Special rules apply for people who get dependent care benefits from their employer. See Form 2441, Child and Dependent Care Expenses, has more on these rules. File the form with a tax return.
  8. Special Circumstances. Since every family is different, the IRS has a series of exceptions to the rules in the qualification process. These exceptions allow a greater number of families to take advantage of the credit. For more information, see IRS Publication 503, Child and Dependent Care Expenses.

Even if the childcare provider is a sitter in the home, taxpayers may qualify for the credit. Taxpayers who pay someone to come to their home and care for their dependent or spouse may be a household employer. They may have to withhold and pay Social Security and Medicare tax and pay federal unemployment tax. Find more on that in IRS Publication 926, Household Employer’s Tax Guide.

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Richard A. Mann has been practicing Family Law for more than 37 years in the Indianapolis area and throughout the State of Indiana. He is a Certified Family Law Specialist as certified by the Family Law Certification Committee, a Registered Family Law and Civil Law Mediator and Guardian ad Litem and Parenting Coordinator. Mr. Mann and his firm, Richard A. Mann, P.C. Attorneys at Law, are proud to have been one of the firms who represented Same-Sex couples who were successful in overturning Indiana’s ban on Same-Sex marriage. He continues to fight discrimination in the law.

While a large portion of Mr. Mann’s practice is in the Family Law area he also represents several corporations on contract, personnel and other matters. He also has a varied General Practice in wills, estates, juvenile matters, collections, probate throughout the state of Indiana. Mr. Mann has tried murder cases as well as a death penalty case.

Mr. Mann has been selected for inclusion in Super Lawyers SuperLawyers Edition for 2009, 2010, 2011, 2012, 2013, 2014, 2015 & 2016.

Follow Richard Mann on FacebookTwitter, or read more blogs by him here.

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Trial Court Erred in Imputing Both Parties Incomes

Family Law Case Review

Case: Karen B. Salser v. Gregg A. Salser
by Mike Kohlhaas, Bingham Greenebaum Doll

HELD: Trial court erred when it imputed Mother to full-time employment as a nurse practitioner, even though her history for the previous five years had been to work about half-time and Mother’s testimony was that no additional hours were available through her current employer.

HELD: Trial court erred when it failed to include Father’s irregular bonus income, which has the potential to equal 28% of his annual base income, in any part of the child support calculation.

HELD: Trial court erred when it ordered the parents to contribute equally to post-secondary educational expenses. Because the equal division was premised upon the erroneous imputation of Mother to full-time employment, then the post-secondary educational expense division was also error.

FACTS AND PROCEDURAL HISTORY:
The parties married in 1993 and filed for dissolution in 2014. At the time of the dissolution proceedings, the parties had one child in college and one in middle school.

Mother was a nurse practitioner who worked part-time and hourly for a physician. For 2012 through 2015, her income varied from $39,946 to $49,786 per year.

Father was a pharmaceutical rep. He earned a base salary of $95,000 per year, but with bonus opportunities of up to another $27,000 per year.

Following the final hearing, the trial court issued its Decree, which included the following pertinent provisions:

1.     The child support order was based upon imputing Mother to full-time employment at her current hourly rate.

2.     The child support order disregarded Father’s potential bonus income altogether.

3.     Because Mother’s imputed income level was comparable to Father’s income level, the trial court’s post-secondary educational expense order provided that the son should pay 34% of his college expenses, with the remainder divided equally between Mother and Father.

Mother appealed.

The Court of Appeals agreed with Mother that imputation was error. The Court relied primarily upon part-time employment by Mother having become established practice during the marriage, coupled with the evidence that no additional hours were available through Mother’s current employer. There was also no evidence that Mother was attempting to reduce her income to avoid a child support obligation.

The Court also agreed with Mother that it was improper for the trial court to completely disregarding Father’s potential bonus income. The Court specifically noted the percentage calculation set forth in the Guidelines that can be developed to provide that a specific fraction of each bonus payment is paid as child support.

Finally, because Mother was improperly imputed to full-time earning potential, the post-secondary educational expense order — which was derived in part from Mother’s imputed income level — was also erroneous.

The case was remanded for a recalculation of child support and the post-secondary educational expense order, consistent with the Court’s opinion.

Judge Bradford dissented, noting the great deference that the Guidelines and case law afford to trial courts, not just in family law matters generally, but in deciding whether to impute income and how to handle bonus income in particular. “Mother, a licensed nurse practitioner, has the ability to work full-time but simply chooses not to, numerous opportunities are available in Mother’s line of work within the community, and Mother would make the same hourly rate ($50 per hour) or higher if she were to accept a full time position.” 

To view the text of this opinion in its entirety, click here: Karen B. Salser v. Gregg A. Salser

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James A. Reed and Michael R. Kohlhaas of Bingham Greenebaum Doll represent clients in a wide spectrum of relationship transition and wealth planning matters, including premarital agreements, estate planning, cohabitation, separation, divorce (especially involving high net worth individuals and/or complex asset issues), custody, parenting arrangements, adoption, and domestic partnerships. Bingham Greenebaum Doll, a multidisciplinary law firm serving regional, national, and international clients, is the fourth-largest law firm in Indiana. The firm’s main practices include corporate, property, litigation, labor, government law, and personal services law. Visit the firm’s website at www.bgdlegal.com.

ICLEF • Indiana Continuing Legal Education Forum, Indianapolis, IN

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Trial Court Did Not Err in Finding that Father was Voluntarily Underemployed, but Erred when Determining How Father’s Income Should be Imputed

Family Law Case Review

Case: Mark H. Miller, II v. Leigh Anne Miller
by Mike Kohlhaas, Bingham Greenebaum Doll

HELD: Trial court did not err in finding that Father was voluntarily underemployed, but the trial court erred when it determined the amount to which Father’s income should be imputed without evidence of prevailing job opportunities and earning levels in the community.

DICTA: When determining an income amount to which a parent should be imputed, this opinion suggests that the trial court is required to consider evidence of all four of the following factors: (1) the party’s work history; (2) the party’s abilities; (3) prevailing job opportunities, and (4) earnings levels in the community. Failing to consider all four of these factors appears to be reversible error.

FACTS AND PROCEDURAL HISTORY:
Mother and Father married in 1999 and had four children together. Mother had been the primary caregiver for the children, but she obtained full-time employment in late 2009, at the about the same time Father lost his job as an insurance agent. Thereafter, Father became the primary caregiver to the children. Mother and Father agreed that Father should return to school, so in 2010, he enrolled part-time at IUPUI.

In 2014, Mother filed a petition for dissolution. At the time of the parties’ 2016 final hearing, Father was still attending IUPUI part-time, but he was also working 15 hours per week which earned him $250/wk. The trial court found Father to be voluntarily underemployed, and imputed him to income of $600/wk for child support purposes. The trial court’s findings suggested the $600/wk amount was based upon Father’s income history as an insurance agent. Father appealed.

Father’s primary argument on appeal was that the finding of voluntary underemployment was erroneous because Father’s decision to return to college was made by agreement with Mother, and that Father should not be penalized for making the decision to return to school. The Court of Appeals rejected these arguments, focusing on the fact that, at the time Father returned to school part-time in 2010, he was also the children’s primary caregiver; since then, Father no longer had the caregiving responsibilities — yet Father continued to take classes on only a part-time basis. “A reasonable inference can be drawn that the time Father spent in his caretaking function is now available for other purposes, yet he is working only fifteen hours a week.”

However, the Court of Appeals agreed with Father that there was insufficient evidence to support the $600/wk amount to which the trial court imputed Father. Interestingly, the opinion suggests that evidence of a party’s abilities and income-earning history, without more, is inadequate on which to determine an imputation amount. Instead, the imputation amount should be determined from four factors: (1) the party’s work history; (2) the party’s abilities; (3) prevailing job opportunities, and (4) earnings levels in the community. The matter was remanded for a hearing on all four factors.

To view the text of this opinion in its entirety, click here: Mark H. Miller, II v. Leigh Anne Miller

 

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James A. Reed and Michael R. Kohlhaas of Bingham Greenebaum Doll represent clients in a wide spectrum of relationship transition and wealth planning matters, including premarital agreements, estate planning, cohabitation, separation, divorce (especially involving high net worth individuals and/or complex asset issues), custody, parenting arrangements, adoption, and domestic partnerships. Bingham Greenebaum Doll, a multidisciplinary law firm serving regional, national, and international clients, is the fourth-largest law firm in Indiana. The firm’s main practices include corporate, property, litigation, labor, government law, and personal services law. Visit the firm’s website at www.bgdlegal.com.

ICLEF • Indiana Continuing Legal Education Forum, Indianapolis, IN

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Support Modifications Typically Inappropriate without Differing at Least 20% from the Prior Order

Family Law Case Review

Case: Danielle Maple v. Travis Maple
by Mike Kohlhaas, Bingham Greenebaum Doll

HELD: Court of Appeals underscores the Indiana Supreme Court’s MacLafferty holding that, when entertaining a child support modification, it will very seldom be appropriate to modify support if the new support amount is not more than 20% different than the previously-ordered support amount.

HELD: When a trial court is establishing a child support order that includes a credit for “prior born” children, the trial court is required to use a prevailing child support worksheet from that prior born child’s case, and the amount of the credit for prior born children may not be re-litigated.

FACTS AND PROCEDURAL HISTORY:
Mother and Father married, had two children, and divorced in 2009. Mother also had one child from a prior relationship, for whom a child support order had been issued in 2005 and never modified. That 2005 worksheet established Mother’s legal duty of support for her prior-born child at $121/wk.

In the instant case, Father endeavored to modify child support for a variety of reasons, including changes of income and parenting time. However, in the course of seeking this modification, Father sought to reduce Mother’s credit for her legal duty to support a prior born child down to $66/wk. The trial court agreed and, recalculating child support, issued a new child support order which differed by only 16% from the prior order. Mother appealed.

The Court of Appeals reviewed the MacLafferty holding, which provides that the circumstances are rare in which child support should be modified without differing at least 20% from the prior order. The Court of Appeals concluded that no such extraordinary circumstances existed in this case, and the trial court’s modification of support was inappropriate.

Further, the Court of Appeals assigned error to the trial court’s recalculation of the amount of Mother’s credit for her legal duty to support her prior-born child. In effect, the Court concluded that a trial court calculating child support is bound to the child support worksheet of the other court that established support for the prior-born child, and the amount of that credit may not be re-litigated in the current court.

To view the text of this opinion in its entirety, click here: Danielle Maple v. Travis Maple

 

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James A. Reed and Michael R. Kohlhaas of Bingham Greenebaum Doll represent clients in a wide spectrum of relationship transition and wealth planning matters, including premarital agreements, estate planning, cohabitation, separation, divorce (especially involving high net worth individuals and/or complex asset issues), custody, parenting arrangements, adoption, and domestic partnerships. Bingham Greenebaum Doll, a multidisciplinary law firm serving regional, national, and international clients, is the fourth-largest law firm in Indiana. The firm’s main practices include corporate, property, litigation, labor, government law, and personal services law. Visit the firm’s website at www.bgdlegal.com.

ICLEF • Indiana Continuing Legal Education Forum, Indianapolis, IN

Posted in Family Law Case Review0 Comments