NEW Indiana Child Support Guidelines 2015

November 16, 2015 /

The Indiana Supreme Court issued an order amending the Indiana Child Support Guidelines on November 5, 2015. Below I have summarized many of the changes. A copy of the Order can be found here.

clarifying that the Guidelines apply to “educational support”;
the Guidelines apply not only to dissolution and paternity actions, but also juvenile proceedings, as well as third-party custodian and guardianship matters;
deleting language setting minimum support at $12.00 weekly;
that “if there were specific living expenses being paid by a parent which are now being regularly and continually paid by that parent’s current spouse or a third party, the assumed expenses may be considered imputed income to the parent receiving the benefit”;
an adjustment to support for subsequent legally adopted children;
as to health care coverage, if the coverage is provided without cost to the parent(s) then zero should be entered as the amount; and, if health insurance coverage is provided through an employer, only the child(ren)'s portion should be added, and only if the parent actually incurs a cost for it;
clarified how to credit social security benefits to a custodial parent;
updating the Guidelines to follow the “new” emancipation age law;
defines which education expenses are controlled expenses and which are extracurricular expenses;
incorporates the Affordable Care Act –“The rebuttable presumption that all children have insurance available at a reasonable cost recognizes the purpose of the Affordable Care Act. Courts should consider any exemption under the Affordable Care Act as sufficient to rebut the presumption that insurance is available at a reasonable cost” ;
a new provision regarding “Self-Monitoringand Compliance” with the requirement to provide coverage, based on the tax penalties in the Affordable Care Act;
a removal of the HIPW worksheet and provisions;
the following language related to the FAFSA form and whether the Court should enter a post-secondary expense order; and
a consideration of how the right to claim a child as a dependent on a parent’s taxes may affect health insurance subsidies or tax penalties under the Affordable Care Act; shall be prorated by the number of persons covered to determine a per person cost.

To discuss this further please contact me.

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categories / child support, Child support, Divorce with Children, extraordinary expenses, Paternity, school
tags / child support, indiana child support guidelines

Tax Exemptions & Tax Issues Related to Children - Indiana Child Support 2015

February 10, 2015 /

The post discusses how the Indiana Child Support Guidelines deal with which parent gets the right to claim children as dependents and receive the corresponding exemption, as well as other tax credits and deductions. Keep in mind that the parents can agree how to share the right(s) to claim. Before we get to the discussion, there are some important tax forms and publications for parents of children to consider.

RULES AND FORMS

I highly recommend reviewing the IRS Publication 501, which provides important details and tax rules related to children.
See IRS Publication 503, which provides the tax rules related to claiming your child's day care or other work-related child care expenses.
Here is a link to the Form 8332, which is the form that must be completed if you need to transfer the right to claim a child or children to the other parent.
The last IRS link is to Publication 970, which describes the tax benefits you may be eligible to claim for education related costs and events. Don't skip this one, because you may be eligible for tax credits (read: cash) for education costs you paid for yourself or a dependent.

How the Guidelines deal with the right to claim....

The Indiana Child Support Guidelines include the following language regarding the right to claim their child(ren) as dependents for tax purposes:

Tax Exemptions. Development of these Guidelines did not take into consideration the awarding of the income tax exemption. Instead, it is recommended that each case be reviewed on an individual basis and that a decision be made in the context of each case. Judges and practitioners should be aware that under current law the court cannot award an exemption to a parent, but the court may order a parent to release or sign over the exemption for one or more of the children to the other parent pursuant to Internal Revenue Code § 152(e). To effect this release, the parent releasing the exemption must sign and deliver to the other parent I.R.S. Form 8332, Release of Claim to Exemption for Child of Divorced or Separated Parents. The parent claiming the exemption must then file this form with his or her tax return. The release may be made, pursuant to the Internal Revenue Code, annually, for a specified number of years or permanently. Judges may wish to consider ordering the release to be executed on an annual basis, contingent upon support being current at the end of the calendar year for which the exemption is ordered as an additional incentive to keep support payments current. It may also be helpful to specify a date by which the release is to be delivered to the other parent each year. Shifting the exemption for minor children does not alter the filing status of either parent.

The noncustodial parent must demonstrate the tax consequences to each parent as a result of releasing the exemption and how the release would benefit the child(ren). In determining when to order a release of exemptions, it is recommended that at minimum the following factors be considered:

(1) the value of the exemption at the marginal tax rate of each parent;

(2) the income of each parent;

(3) the age of the child(ren) and how long the exemption will be available;

(4) the percentage of the cost of supporting the child(ren) borne by each parent;

(5) the financial aid benefit for post-secondary education for the child(ren); and

(6) the financial burden assumed by each parent under the property settlement in the case.

In sum, the Guidelines suggest that judge should consider how shifting the right will make the most money available for the child(ren).

There are other issues to consider as well. For example, at some income levels the value of the right to claim "phases-out" so the right to claim is not worth as much to that parent. Also, there are other tax deductions and/or credits that follow the the parent who has the right to claim. Consider having an accountant or other tax professional testify regarding the overall tax effect if the amounts are significant.

Effective July 1, 2011, the court must 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. This law also clarified that a court must specify that the noncustodial parent of a child may claim the child as a dependent and order the custodial parent of the child to take all actions necessary to release the custodial parent’s claim to the exemption in the manner required under federal law. Finally, the law also requires a court to include in a court order that a parent who is ordered to pay child support may only claim the child as a dependent if the parent has paid at least 95% of the parent’s child support for the calendar year for which the parent is ordered to claim the child as a dependent by January 31 of the following year.

To discuss this please contact me. To see all of my postings on this topic search here.

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categories / child support, day care, divorce, guidelines, taxes

Back To School! Who Pays for School Supplies, Clothes and Fees? Indiana Child Support Guidelines

August 08, 2014 /

It’s time to go back to school and a survey found that the average amount spent on back-to-school supplies and clothes is approximately $600.00 per child. In terms of consumer spending, back-to-school shopping is only eclipsed by holiday shopping.

When parents are divorced, or were never married and live separately, who pays for the school supplies and clothes?

Some court/support orders set out who pays for what specifically in the order, but most do not. For those that do not, the default is that the primary custodial parent pays for these items. Why? Because that parent generally is the parent who receives support (for an exception read this ) the child support guidelines assume that the custodial parent bears these costs. In fact, the purchase of these items is one of the reasons the primary custodial parent receives child support.

However, if the parents share physical custody and there is not a primary custodian, then they must decide who is going to be responsible for the "controlled expenses". The guidelines define controlled expenses as follows:

Controlled Expenses. This type of expense for children is typically paid by the custodial parent and is not transferred or duplicated. Controlled expenses are items like clothing, education, school books and supplies, ordinary uninsured health care and personal care. For example, the custodial parent buys a winter coat for the child. The noncustodial parent will not buy another one. The custodial parent controls this type of expense. The controlled expenses account for 15% of the cost of raising the child. The parenting time credit is based on the more time the parents share, the more expenses are duplicated and transferred. The controlled expenses are not shared and remain with the parent that does not get the parenting time credit. Controlled expenses are generally not a consideration unless there is equal parenting time.

If you have a child in private school or some other type of special school these costs are considered separately. The guidelines call these "extraordinary educational expenses" and provide as follows:

Extraordinary educational expenses may be for elementary, secondary or post secondary education, and should be limited to reasonable and necessary expenses for attending private or special schools, institutions of higher learning, and trade, business or technical schools to meet the particular educational needs of the child.

Elementary and Secondary Education. If the expenses are related to elementary or secondary education, the court may want to consider whether the expense is the result of a personal preference of one parent or whether both parents concur; if the parties would have incurred the expense while the family was intact; and whether or not education of the same or higher quality is available at less cost.

In any case, the best practice as to school costs is to have the payment of these costs detailed in the support order. Otherwise, if the costs are to be shared, make sure the costs are discussed prior to being incurred so that each parent knows their responsibility. If an impasse occurs, mediation is a great way to resolve the dispute.

If you would like to discuss this matter further, please contact me at .

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NEW Indiana Child Support Guidelines 2015

Tax Exemptions & Tax Issues Related to Children - Indiana Child Support 2015

Back To School! Who Pays for School Supplies, Clothes and Fees? Indiana Child Support Guidelines