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Imagine if every year, when you filed your income tax return, signed
under "penalty of perjury" (i.e. tell a lie, go to jail),
you knew for sure that in less than a month you would be in tax
court defending that tax return, line by line, under cross-examination
by an avaricious government tax attorney.
That's exactly what happens to parents who are contesting the amount
of child support paid or received under California uniform child
support guidelines. The parents are required by state law and local
court rules to exchange and file in court "Income and Expense
Declarations," a financial disclosure made under oath. Shortly,
the parties will be in court defending the facts in these declarations.
An error or omission can be costly. An outright lie is perjury.
Frequently, parents omit their overtime pay and assume only straight
time applies. Not true. All income in any form, including "under
the table" payments, must be disclosed. Equally frequently,
self-employed parents mistakenly report their gross revenue -- rather
than their net profit after deducting business expenses -- as their
gross income. This inflates their income and results in an inaccurate
child support calculation.
Calculating California child support guidelines involves the use
of a computer program that takes into consideration and calculates
appropriate child support based upon the parents' income, federal
and state income taxes, their tax deductions, their other deductions,
the percentage of time the parties spend with their children, support
paid to previous spouses and children of other relationships, and
many, many other factors. There are many loopholes and legitimate
income deductions in this statewide system. It is worth learning
what they are. Otherwise, it's garbage in, garbage out. Errors are
costly.
Take this example: John and Mary have two young children, ages 3
and 8 years. Both live primarily with Mary and visit regularly with
John. John earns $5000 per month. Mary is a self-employed child
care provider and earns $1500 per month gross. They were married
ten years.
According to the California child support calculator, John should
pay Mary $1,278.00 a month in child support and $553 in spousal
support, or a total of $1831 per month in support. But if John and
Mary agreed to call the entire support package "family support"
or "spousal support", both of which are tax deductible
to the payer (and taxable to the recipient), the guideline support
amount would be $2,357 per month. You might think, "poor John,
he just got a $526 a month hike in his support obligation."
However, because of the tax deduction, the extra $526 to
Mary and the children only cost John $17 a month extra! He's sharing
his tax savings with Mary and the children and Uncle Sam is footing
the bill.
Assume John has two children from a new spouse or relationship.
Now the California child support calculator tells us that John should
pay Mary only $1211 a month instead of $1831. That's a $620 a month
difference, or $7,440 a year more for John and his new children.
If John is paying $620 a month in child support for two children
of a previous relationship (not living with him), then his support
payment to Mary would be $1414 a month. And if Mary were to adopt
a child after the divorce, and without John's involvement, her support
package would go up to $2118 (child support of $1343 and spousal
of $776). Both child support and spousal support increase under
the guidelines in the last scenario! Quite a surprise for John,
who has no legal obligation to Mary's adopted child.
Before agreeing to accept, or pay, any amount of support, study
the law, rules, and the many complexities of this guideline system.
In John's case, he has 180 child support payments and essentially
endless spousal support payments to make. Every $100 a month difference
in the guideline becomes at least $15,000 difference in child support.
You do the math.
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