Child Tax Exemptions, Deductions & Divorce

February 28, 2017

taxes-and-1040

Q: What is a dependent exemption?

  • As applied to your child, the dependent exemption is an amount of money that you are permitted to subtract from your adjusted gross income. The dependent exemption reduces the amount of income on which you will be taxed (in effect, an exemption operates the same as a deduction).
  • In 2016, the dependent exemption is $4,050 per child. The right to claim exemptions, however, phases out at higher income levels. In 2016, the phase-out begins at $259,400 for single parents and $285,380 for single parents who claim head of household status.

Q: How is the right to claim a child’s dependent exemption determined in a divorce situation?

  • Only one parent may claim a dependent child on his or her tax return in any given year. The parent who claims that child as his or her dependent is also the parent who claims that child’s dependent exemption.
  • According to the IRS, the default parent, in terms of claiming the dependent exemption for a child in a divorce situation, is the one with whom the child lives for greater than 50% of the time during that tax year. (Note: The IRS refers to the parent with whom their child lives for greater than 50% of the year as the “custodial parent.”)
  • In 50%/50% custody situations, the default parent is the parent with the higher adjusted gross income.

 

Q: Can the non-custodial parent ever claim a child’s dependent exemption on his or her tax return?

  • If the divorcing parents agree that the child’s dependent exemption may be claimed by the non-custodial parent, the IRS will allow this.
  • Such an agreement should be clearly stated in the parents’ Property Settlement Agreement (PSA) and Final Order of Divorce/Divorce Decree.
  • The custodial parent will need to complete and sign IRS Form 8332 each and every year that the non-custodial parent is permitted (by the PSA) to claim that child’s dependent exemption. The non-custodial parent must attach this form to his or her tax return every year that he or she claims that child’s dependent exemption.
  • Parents also have the option of alternating their child’s dependency exemption on an every-other-year basis, or as they otherwise agree.

 

Q: Are there other tax benefits that are attached to the child’s dependent exemption?

  • The parent who claims the child’s dependent exemption is also the parent who is eligible for the child tax credit (if applicable, depending on the parent’s income).
  • The parent who claims the child’s dependent exemption is also the parent eligible to claim that child’s educational tax credits, also known as college credits and, as of 2015 the American Opportunity Credit (if applicable, depending on the parent’s income and other factors)

 

Q: Are there tax benefits that remain with the custodial parent (despite the non-custodial parent claiming that child’s dependent exemption)?

  • The custodial parent remains the only parent eligible to claim the earned income tax credit.
  • Also, only the custodial parent (not necessarily the parent who claims that child’s dependent exemption) is eligible to claim the child and dependent care tax credit (also known as the day care credit).
  • Note: The same rules apply if a parent is eligible, through his or her place of employment, for a Flexible Spending Account (FSA).
  • If the parents share the child’s custody 50%/50%, the IRS defaults to the parent with the higher adjusted gross income, i.e., the parent with the higher adjusted gross income is treated as if he or she is the “custodial parent.”
  • In 50%/50% custody situations, parents often negotiate which one will have the custodial parent benefits for income tax purposes (as opposed to letting the IRS default dictate the outcome).
    • This is custom, but not specifically addressed by the IRS.
    • The IRS reasoning: There are 365 days in a year (an odd number). Therefore, a true 50%/50% custody share is impossible.
    • NOTE: Only one parent may claim the earned income tax credit and the child and dependent care tax credit.

 

Q: Which parent is eligible to file as Head of Household?

  • A parent who is single and has a dependent child living in his or her home may be eligible to file taxes as “head of household.
  • Only the custodial parent – the parent who cares for the child greater than 50% of the time – is eligible to file his or her taxes as head of household.
  • Unlike the dependent child exemption, the right to file as head of household is not exchangeable between parents.
  • The head of household tax status, versus filing as “single,” often lowers your tax bill (but phases out at higher income levels).
    • Head of household status often lowers your tax rate, thereby lowering your tax bill. .
    • If you claim the standard deduction (versus itemizing your deductions), that number will be higher, thereby lowering your tax bill.
  • The specific criteria follows:
  • Your spouse did not live in your home for the last 6 months of the year for which the taxes are filed (this applies to parents who are separated, but not yet divorced).
  • You will not be filing a joint return with your spouse (this applies to parents who are separated, but not yet divorced).
  • You paid over half the cost of maintaining your home for that tax year.
  • Your child lived in your home over half the year, i.e., you are the “custodial parent” (even if the other parent claims that child’s dependency exemption).
  • Your child is considered a “qualifying child”, meaning he or she has not turned 19 by the end of the tax year (if not a full-time student), or is younger than 24 at the end of the tax year (if a full-time student for at least 5 months during the tax year), or is permanently disabled.
  • In 50%/50% custody situations, parents often negotiate which one will have the right to file as head of household (as opposed to letting the IRS default – that only the custodial parent is permitted to file as head of household – dictate the outcome).
    • This is custom, but not specifically addressed by the IRS.
    • The IRS reasoning: There are 365 days in a year (an odd number). Therefore, a true 50%/50% custody share is impossible.
    • NOTE: Only one parent may file as head of household (as it related to a child).
    • With more than one child, in a 50%/50% custody situation, parents sometimes each care for a child greater than 50% of the time and, as a result, each parent is potentially eligible to file their taxes as head of household.

 

Q: At what age is a child no longer considered a “dependent”

  • To qualify as a dependent, your child must be under the age of 19 on December 31 of the tax year in question.
  • However, if your child is a full-time student (as defined by his or her school), he or she may be your dependent for income tax purposes as long as he or she is under the age of 24 on December 31 of the tax year in question.
  • If your child is permanently and totally disabled, there is no age limit.

Posted by Robin Graine, JD, Virginia Supreme Court Certified Mediator

This blog and its materials have been prepared by Graine Mediation for informational purposes only and are not intended to be, are not, and should not be regarded as, legal advice.  This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship.  Internet subscribers and online readers should not act upon this information without seeking professional counsel.

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Child Custody In a Virgina Divorce: Legal Custody & Physical Custody Defined

June 9, 2015

child custodyWhen discussing various parenting arrangements with clients and prospective clients, I have learned that most people who are in the midst of a divorce/separation, or are contemplating such an event, make similar mistakes when it comes to Virginia “custody terminology”.

Such vocabulary faux pas are hardly indicative of a parent’s heartfelt desire to spend time with his or her child.  However, it is usually helpful to clients when they begin to get a handle on how the Commonwealth of Virginia goes about assigning labels in the context of divorce and co-parenting.  (Co-parenting refers to any situation when two parents are raising a child, in two separate households, whether or not those parents were ever married).

Of course, your mediator or divorce lawyer should certainly be able to figure out what you mean – no matter how you phrase it – when it comes to your desires for your child’s future parenting arrangements.  Not all mediators or divorce lawyers, however, do a good at explaining legal terminology.  The same goes for clients’ ability to absorb and process information in such a stressful and confusing time.

As a result, I have seen plenty of post decree (after divorce) situations where basic misunderstandings of the custody terms in the parties’ Final Order of Divorce (aka Divorce Decree) kept them fighting about their child several years after their separation and divorce.

To help alleviate this unfortunate and rampant misinformation about various custody terms in Virginia child custody cases, here is my “Virginia Custody Dictionary.”

Legal Custody:

Determines which parent has the right to make major decisions concerning their child.  Legal custody has nothing to do with where the child lives.

There are two types of Legal Custody:

    (1) Joint Legal Custody –  

        Major decisions must be agreed to by the parents.

    (2) Sole Legal Custody –

        Major decisions need only be made by the parent who is granted Sole Legal Custody.

  • The term “Legal Custody” is not intuitive to most people and problems often arise, down the road from when the settlement agreement is signed/Court order is entered, over the parents’ often diametrically opposite interpretation of the term “major decisions”.
  • Mediators encourage clients to jointly define the term “major decisions,” as part of the settlement of the custody issues in their particular case, to help save them from possible trouble down the road.
  • On the other hand, divorce lawyers tend not to focus on crafting an agreed client-interpretation of the term “major decisions”. Instead, they leave it up to the Courts to decide, should there be a problem in the future, whether a decision made, or to be made, by a parent is, in fact, “major”.  Ultimately, the Courts do have final decision-making power; but, a meeting of minds between parents is usually enough to end bitter battles before they start.
  • Examples of “Major Decisions” – Those decisions which are generally agreed by divorce lawyers and courts to be “major decisions”:
  1. Which school the child will attend;
  2. Whether the child will be required to undergo an elective medical procedure (e.g. plastic surgery on a scar);
  3. Whether braces will be placed on a child’s teeth for purely cosmetic reasons;
  4. Whether a child will be required to engage in psychotherapy;
  5. Who will be the child’s substitute caretaker necessary for the parents to earn a living (known as “work related childcare”, aka WRCC); and
  6. Choice of sleep-away camps.
  • Examples of “Gray Area Decisions” – Where decisions may or may not be considered “major”:
  1. Which week or two-week long camp a child will attend in the summer (not sleep-away camps);
  2. Which extracurricular activities a child will participate in during that parent’s custodial care time.
  3. Whether a child will participate in a specialized academic program during school hours (remedial or enhanced learning);
  4. Whether a child will participate in various in-school clubs, groups and activities;
  5. Choice of classes (middle school and high school);
  6. Choice of basic disciplinary techniques;
  7. Choice of how much to give a child for allowance/spending money; and
  8. Choice of vacation destinations with children (within reason);
  9. Choice of children’s playmates.

Physical Custody:

Determines where the child will live and the amount of time the child will spend with each parent.

Physical custody pertains to which parent (sometimes both, sometimes only one) has the primary responsibility for the care and control of the child on a given day.

  • Day to day decisions, of a routine nature, are made by the parent with whom the child is being cared for on that day.

 

Sole Physical Custody:

  • In Sole Physical Custody situations, that parent is granted all (or almost all) of the custodial care rights and responsibilities for the child.
  • The other parent is not usually involved in day-in-and-day-out responsibilities that come with raising a child.
  • The other parent is usually permitted “visitation” with his or her child (except in cases where that parent would present a danger to the child);
  • In Virginia, even in cases where one of the parents is granted Sole Physical Custody, the other parent still has the legal right to review the child’s medical and academic records (with exceptions);
  • To add to the confusion, when calculating Virginia Child Support Guideline Obligations, the “regular” calculation is called the “Sole Child Support Calculation”.  This poorly named calculation simply means that the non Primary Custodian cares for the children fewer than 91 days per year,2  even though the caretaking duties may clearly be shared between the parents.
  • Advocating for the denial of a parent to be involved in major decisions concerning his or her child is serious. It generally means that there is something very wrong with one or both of the parents’ ability to care for the child and/or use sound judgment when making decisions concerning the child.
  • In cases where one or both of the parents thinks that a child should have no or very little custodial care time with the other parent, it is often advisable that those parents litigate (hire a divorce attorney) and not mediate their cases.

Shared Physical Custody:

  • In Shared Physical Custody situations, it is presumed that both parents are involved, to a much greater extent than in a “Sole Custody” situation, in the day-in-and-day-out responsibilities that come with raising a child.
  • However, Shared Physical Custody does not, necessarily, mean 50/50.  It does, however, mean that there is a discernible sharing of parental caretaking duties for the child.
  • The term “Shared Physical Custody” is not clearly defined in Virginia law in terms of custody and parenting arrangements.
  • To add to the confusion, when calculating Virginia Child Support Guideline Obligations, there is a special calculation available for situations where a “non-primary custodian” cares for a child 91 or greater days per year.  That calculation is called the “Shared Child Support Calculation.” The Virginia Shared Child Support Calculation is able to accommodate various ratios of caretaking duties (e.g. 50/50 custody, 60/40 custody, etc.).

Primary Physical Custody:

  • The parent who is the “Primary Physical Custodian” is usually the parent who cares for the child greater than 50% of the time.
  • The term “Primary Physical Custodian,” however, is not well-defined in Virginia law.  There are situations where parents have less than a 50/50 custody share (exp. 60/40, 70/30), but where a settlement agreement/Court Order show that the custodial care plan is “Shared Custody” (even though there is, by most standards, a “primary parent”).
  • Some divorce attorneys are concerned that a judge may allow a parent, who is referred to as the “Primary Custodian,” in the settlement agreement/Court Order, to have more potential influence in possible future battles involving the child (e.g., moving away with the child).
  • If a parent is referred to in a settlement agreement/Court Order as the “primary custodian,” a school district may defer to that document when determining which school a child should attend.  (See previous Blog article: https://fairfaxdivorceblog.com/?s=prince+william )

In certain situations, and if there is no tax planning as part of the parties’ settlement, The IRS automatically awards certain child-related tax benefits to the “Custodial Parent”.  The IRS does not use the term “Primary Parent”.  The “Custodial Parent,” in terms of tax law, is the parent who cares for the child greater than 50% of the time during that tax year.  If the settlement agreement/Court Order conflicts with the actual caretaking schedule, this could present a problem if both parents wish to claim the child as their dependent exemption. This is not a problem, however, if parents insure that the settlement agreement/ Court Order matches their actual caretaking activities and if they make sure that tax planning is a part of their settlement (as it should be). (See previous Blog article https://fairfaxdivorceblog.com/?s=tax+custody )

This blog and its materials have been prepared by Graine Mediation for informational purposes only and are not intended to be, are not, and should not be regarded as, legal advice.  This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship.  Internet subscribers and online readers should not act upon this information without seeking professional counsel.

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Divorce & Taxes Series: Part 2

September 11, 2011

Tax Snippet #3 – The Exemption for a Dependent – Who Gets to Keep It? The IRS will, in most circumstances, dub the person with whom the child lives the majority of the time as “The Custodial Parent”.  This is true unless your settlement agreement and/or divorce decree clearly states otherwise, e.g. one parent is officially named the “primary custodian”.2 Why is it important, for tax purposes, which parent the IRS views as the “custodial parent”?  Because, the custodial parent, by default, gets to keep the child exemption for a dependent child – a good savings for most people.

What happens if your settlement agreement/divorce decree states that custody be “shared equally” by the parents?  Confusion and trouble, if you don’t make some decisions.  To help in these situations, the IRS has implemented default criteria to determine who, in fact, is the “custodial parent”.  The IRS looks at whether:

  • Your child is under age 19 at the end of the year (or under age 24 at the end of the year if a full-time student);
  • Your child has lived with you for more than half the year;
    and
  • Your child has provided less than half of his/her support for the year.

The trouble comes when two taxpayers meet all of the criteria above and their settlement agreement/divorce decree is silent as to which parent gets the dependency deduction.  What to do?  The IRS has made a tiebreaker for these circumstances:

  • The custodial parent is the one with whom the child spent the most number of nights in the tax year in question.

But, what if the parents truly shared time with their child (ren) on a 50-50% basis?

  • The IRS will grant custodial parent status on the parent who has the highest adjusted gross income.

Is the dependent child deduction “bargainable”?  Yes.  Some people trade off the exemption (every other year), some split up the children (e.g., dad takes the boy, mom takes the girl), some negotiate the deduction in exchange for something else of value, and some couples (smart ones) go to an accountant to see what the true benefit would be to each of them before making proposals and engaging in negotiations regarding the dependent child exemption.

As of this writing, the IRS requires the custodial parent to complete and sign IRS Form 8332 and have it attached to their and the other parent’s tax return if the primary custodian is giving away her/his right to the deduction.  (This has not always been the case and you should check on the rules each and every year that you file your taxes to see what the IRS has cooked up on this one.

__________________________

2Of course, if your child’s living situation directly contradicts your divorce paperwork, this can create lots of problems and you may want to consider renegotiating your written parenting arrangements sooner rather than later.

*  *  *  *  *  *  *

Tax Snippet #4 – Head of Household.  Somewhere in between “married”, “married filing separately” and “single” is the divorced taxpayers’ best friend: “head of household” status.  What is that?  Filing as “head of household” usually nets you:

  • A lower tax rate than if you claim a filing status of single or married filing separately;
  • Allows more liberal income limits before the IRS puts a damper on your child tax credit (same for retirement account contributions);
  • You may be able, if you are still married, to claim certain credits (such as the dependent care credit and the earned income credit) that you cannot claim if your filing status is married filing separately;
    and
  • It increases the income limits that reduce your child tax credits.

You must meet the following criteria to be eligible to file as “head of household”:

  • You file a separate return (if you are still married);
  • Your spouse did not live in your home during the last 6 months of the year (whether or not you are yet divorced);
  • You paid over half the cost of keeping up your main residence;
  • You qualify to claim your children as dependents (whether or not you have kept or given away the dependency deduction to the other parent); and
  • Your home was the main home of your child for more than half the year.

These Tax Snippets are written based on my observations and experience.  I am and not a CPA, tax planner or tax attorney.  I am a mediator and former family law attorney. These are, however,  some of the key issues that I see over and over again with my clients.  This series of articles is intended to help you “get your feet wet” in this mucky area of divorce.  If you think any of these issues might affect you, see your tax professional for up-to-the-minute and personally-tailored tax advice. 

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Harsh Exposure of Divorce Lawyers & Courts: The Divorce Corp Documentary

July 7, 2015

UYe2xpOm.jpegDivorce Corp http://www.divorcecorp.com/ is a 2014 documentary film, directed by Joe Sorge, that exposes the inner workings and, in their own words, “the appalling waste and shameless collusive practices” seen daily in U.S. family law courts. This film presents a shocking viewpoint on the divorce industry, divorce lawyer practice, and the family law court system in the United States.   Divorce Corp’s goal is to make the viewer feel enraged toward the family law courts and the divorce attorneys who, they say, take advantage of individuals who are in a weakened emotional state.

The statistics presented in Divorce Corp are alarming.  For example, the producers estimate the total costs of divorce to be $50 Billion Dollars per year! In relatable financial terms, Divorce Corp estimates that the total dollars spent by Americans on their divorces, each year, is equal to the dollars needed:

  • To produce a healthy lunch for every child, every day, grade school through high school, in North America, South America, and Africa;
  • To pay the tuition for 5 million college students;
  • To fund the research and development of 50 new medicines each year.

While these statistics are tremendous, they do not compare to the wickedness that Divorce Corp asserts that the family law court system and their main players, the divorce attorneys, are capable of. The goal of Sorge and his guest “experts” is to prove that there is mass corruption in the family law courts in the United States.

They spend much time on the fact that family law courts are “courts of equity”, meaning that there are no juries and no right to an attorney –- despite the fact that people’s basic rights, such as the right to raise and enjoy the companionship of one’s children and the right to use and distribute one’s own hard earned money as the earner sees fit — are taken from them every day in divorce court.

Judges, they tell the viewer, have the authority to order complete liquidation of the parties’ assets and to issue restraining orders, even when there is very little evidence to support such a deprivation of liberty and seizure of real estate, personal property and money. Divorce Corp presents these facts in such a light as to make the viewer almost queasy at the thought of how one all-powerful judge can make extreme decisions, without even the nominal due process protections afforded criminals, and how an individual can be completely railroaded by the family law court – and pay for that railroading out of his or her own pocket!

The facts and statistics that Divorce Corp presents are deeply unsettling; but a skeptical eye is necessary considering the extreme sensational manner in which the information is presented. The producers of this documentary film focus on the absolute worst-case divorce scenarios and only showcase the most egregious of problems that individuals have had with family law judges. Though there is no doubt that these terrible situations occur, most reasonable viewers would have to wonder just how often and/or how likely these incredibly horrendous situations arise?  Divorce Corp’s modus operandi is to make it seem as if everyone getting a divorce will be severely overcharged by their divorce attorney and will, chances are, experience a corrupt judge who is out to ruin one of the spouse’s lives.

Though Divorce Corp did a sensational job of presenting the horrors of the divorce industry, divorce lawyers and the family law courts, it did not offer an alternative solution to that system, nor did the writers, director or “experts” provide any guidance whatsoever as to what could be done to reform the family law court system. No alternatives to litigation were presented and this is a shame considering there is a very effective and sensible alternative to divorce litigation: Mediation.

Parties that mediate the settlement of their divorce are able to avoid the court system and remain in control of their children, their assets and their future.  The parties create their own personalized settlement agreements, which include all matters of custody, child support, spousal support and the distribution of property and debt, by working together, with the help of a neutral party, i.e. the Mediator.   The Mediator works with the parties in four specific areas:

  1. Pinpointing relevant issues for settlement (usually eliminating strictly emotional issues that merely inflame parties and fuel litigious behavior);
  2. Gathering information about the children and all other relevant factual and financial information necessary for the parties to make sound settlement decisions for the present and the future (as much as practically possible);
  3. Sharing of information by the Mediator which is important for the parties in making fair and informed settlement decisions (e.g. divorce law and legal culture in the area, divorce tax law, expert information related to the effect of divorce on children and potential financial implications of various settlement decisions); and
  4. Assisting the parties in their negotiations and in reaching compromises that are mutually agreed and that give each of them the best possible opportunity for a fresh start.

Mediation prevents one spouse from gaining power over the other spouse, eliminates the aspect of an all powerful judge, helps individualize the settlement based on the needs of the family and costs a fraction of what divorce litigation costs.  As the producers of Divorce Corp correctly point out, litigation often creates more problems and difficulties for divorcing parties than it solves. Instead of focusing on helping divorcing men and women move forward with their lives, litigation tends to drag them back through all the difficulties of a marriage that has, for all intents and purposes, already ended.

Written by Jessica Wilds, Mediation Assistant

This blog and its materials have been prepared by Graine Mediation for informational purposes only and are not intended to be, are not, and should not be regarded as, legal advice.  This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship.  Internet subscribers and online readers should not act upon this information without seeking professional counsel.

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When Should Married Couples Check ‘Married, Filing Separately’?

March 1, 2015

Graine Mediation is pleased to introduce Julian Block, JD as our guest blogger this week.  Mr. Block is a leading authority on tax planning for divorce and the author of Julian Block’s Tax Tips for Divorce, from which this article is an excerpt.

alg-taxes-irs-jpg

Married couples need no reminder that they can benefit from joint filing when one mate earns all or considerably more of the income than the other. That tax break, though, can become a trap for spouses who decide to split, but don’t obtain a divorce or a legal separation. They still have the option to file jointly, assum­ing both partners are willing to do so. Nevertheless, one or both might find it more advantageous to file separately. The financial implications are huge.

Among other drawbacks for joint filers: they’re jointly and severally liable. That means married persons remain on the hook even if their marriage breaks up after they file a joint return. So if the IRS audits their return and demands extra taxes, it can dun either mate for the entire amount of any additional taxes, penalties and interest that becomes due.

Nevertheless, there are some drawbacks to filing separately. Whatever a couple’s reasons for avoiding tax togetherness, the two of them may be in for an unpleasant and expensive surprise when filing time rolls around. The taxes they’ll pay as married persons filing separately can be considerably more than the taxes they’d owe as joint filers or even as two unmarried persons.

There are other drawbacks for married persons who choose to file separately. One is that both of them must use Schedule A of Form 1040 to itemize their deductions for charitable donations and the like or that both must use the standard deduction.

Special rules for married persons living apart. Fortunately, there’s a way out of these traps for many married persons. An often overlooked break entitles them to be treated as if they were unmarried for the year in question—provided they fulfill certain requirements. The result: Even though they aren’t divorced or legally separated, they’re excused from having to use the rates for a married individual filing separately and, instead, receive the benefit of the more favorable rates for a head of household.

To take advantage of head of household rates, you have to pass a four-step test.

  •  Step 1: You file a separate return from your spouse.
  •  Step 2: Your spouse didn’t live with you at any time during the last six months of 2014. You and your spouse must live in separate residences, warns the IRS, and the courts agree. The Tax Court has ruled that a hus­band failed to qualify as a head of household when he and his wife agreed to live in separate areas of the same residence. Thus, living apart under one roof doesn’t pass muster.

In another dispute, the court reminded Laurel Hopkins that sharing the same quarters for as little as one day during the last six months of the year can be fatal. Before more than six months had elapsed during the year at issue, Laurel and her husband, William, had ceased to live together; but during the balance of the year, she sometimes let William stay overnight be­cause he was unable to find a dwelling.

As she paid all the household bills and was the sole support of their two children, Laurel, not unrea­sonably, believed herself entitled to file as a head of household. Unfortunately, in the course of a subse­quent IRS audit, Laurel let slip that William sometimes stayed in her apartment. On the basis of that admission, the feds determined that Laurel’s proper filing status was that of a married person filing separately. Though sympathetic to Laurel’s predicament, the Tax Court agreed with the IRS that a wife who shelters a homeless husband at any time during the last six months of the year disqualifies herself for head of household status.

 To avoid getting caught in an audit trap like Laurel, don’t chat yourself into loss of a tax break. Confine your answers to the questions raised.

  •  Step 3: You paid more than half of the cost of keeping up your home for 2014.
  •  Step 4: Your home was, for more than half of 2014, the principal residence of your child, stepchild or adopted child, whom you can claim as a dependent.

You aren’t necessarily disqualified from filing as a head of household just because you’re unable to claim the child. As the parent with custody—the mother, in most cases—you continue to be eligible, if you sign IRS Form 8332, which allows the 2014 exemption to be claimed by your spouse, the parent without custody.

When couples live apart by mutual agreement, they might be able to work out an arrangement whereby each spouse can claim a dependent child and each qualifies as a head of household. Congress enacted this special provision that treats married persons as unmarried individuals primarily for the benefit of abandoned wives (or husbands). But it worded the provision broadly enough to cover couples who have separated and who live apart by mutual agreement—without any actual abandonment.

Julian Block writes and practices law in Larchmont, N.Y. and was formerly with the IRS as a special agent (criminal investigator) and an attorney. He is frequently quoted in the New York Times, the Wall Street Journal, and the Washington Post, and has been cited as: “a leading tax professional” (New York Times); “an accomplished writer on taxes” (Wall Street Journal); and “an authority on tax planning” (Financial Planning Magazine). This article is excerpted from “Julian Block’s Tax Tips for Marriage and Divorce,” available as a Kindle at Amazon.com and as a print copy at julianblocktaxexpert.com. Law professor James E. Maule, a professor at Villanova University School of Law and Graduate Tax Program, praised the book as “An easy-to-read and well-organized explanation of the tax rules.” The National Association of Personal Financial Advisers says it is “A terrific reference.”

This blog and its materials have been prepared by Graine Mediation for informational purposes only and are not intended to be, are not, and should not be regarded as, legal advice.  This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship.  Internet subscribers and online readers should not act upon this information without seeking professional counsel.

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How to Get Started in Divorce Mediation

November 11, 2014

phoneAre you considering mediation for your divorce, but don’t know how to get started? Don’t worry. It’s not a difficult process. At Graine Mediation, we start with an Intake Phone call: (571) 220-1998. We are usually able to help you start feeling better about settling your divorce case with that first call.

Before Graine Mediation takes on a new client, we require Intake Phone Calls with both parties. These initial calls are free. They last approximately 20 minutes each. Clients are encouraged to ask the mediator, Robin Graine, as many questions as they have.

The Intake Calls are confidential, which helps clients relax and be able to discuss difficult issues without fear of anything being repeated to the other party. Not only that, but by having the phone call in their own home or environment, free of charge, clients feel comfortable both in their environment and in the fact that they are not being charged by the minute! Our firm believes in generous Intake Phone Calls because it helps to ensure that our potential clients truly wish to mediate, and understand what mediation is. Also, it is part of our job to assess whether mediation is the best fit for each family’s unique circumstances and, if not, to make a more appropriate referral.

During the Intake Phone Call, I enable clients to:

  •    Tell their story;
  •    Sift through the facts of the case and begin formulating clear issues to be resolved;
  •    Focus in on their needs and, if it helps, the needs of the other party;
  •    Formulate clear ideas about what is best for their children (if they have children);
  •    Gather information and answer important questions;
  •    Discuss tasks outside of mediation that may be necessary in order to settle the case; and
  •    Discuss the strengths and weakness of various settlement options (which include everything from the tax implications to the emotional fall-out possible to children and parents).

This call also helps us at Graine Mediation do our job more efficiently. With an idea of the facts and issues in a case, as both parties see them — legal, financial, emotional – we are able to move forward much more quickly in the settlement process than would otherwise be the case. The parties, too, tend to be more goal-oriented and are in a better position in terms of helpful legal, financial, tax and parenting information.

If you have been considering divorce or custody mediation, but just don’t know where or how to start, give us a call at (571) 220-1998. We can help determine whether mediation is right for your situation, or at least get you pointed in the right direction.

Posted by Robin Graine, JD, Virginia Supreme Court Certified Mediator

This blog and its materials have been prepared by Graine Mediation for informational purposes only and are not intended to be, are not, and should not be regarded as, legal advice.  This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship.  Internet subscribers and online readers should not act upon this information without seeking professional counsel.

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Child Support Calculation in Virginia – Rebutting the Guideline’s Amount

April 8, 2014

moneyIn Virginia, the Child Support Guideline amounts come from a table which is set forth in the Virginia Code §20-108.2. That Guideline’s Table dictates the “presumptive amount” of child support to be paid in various situations. (See http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+20-108.2) That child support obligation (a single dollar amount that Virginia says your child will need in order to “make it” in the world based on his/her parents’ financial status) is then divided up between the parents, based on their percentage share of income produced and, in certain situations (see last bullet point below), the amount of time that the child spends with each parent. The parent that earns the most money is usually the parent who ends up actually paying child support to the other parent (though not always, depending on the custody share arrangements).

To calculate the presumptive amount of child support, you need the following information (which become the variables for the calculation):

  • gross monthly income for both parents (usually pretty simple except in cases of small business owners and sales professionals);
  • the actual cost of health insurance for the child (not the entire family);
  • the costs of work related childcare (though this is often factored outside of the calculation);
  • and, in cases where the child spends greater than 90 days (24 hour periods) with the non-primary parent (which also includes 50/50 custody cases), the number of days the child spends with each parent per year;
  • and, in cases where there is also a spousal support obligation, that amount, too, is usually put into the calculation.

The best way to calculate child support is with a professional – a divorce mediator or attorney. Unfortunately, most clients leave out key information or miss a variable when they try and figure their own child support amount with online calculators. At least, that has been my experience. It’s never a bad idea to get some preliminary numbers, but a professional should really assist before you get committed to (or get upset by!) a child support amount.

Once the parties agree/the judge determines what the correct variables are to run a Virginia Child Support Calculation (i.e. gross incomes, cost of health insurance, etc.), the amount calculated is presumed to be correct. However, in certain situations, a parent(s) does not agree with that number – and therein lies a big problem.

A battle over whether or not to apply the presumed child support amount in a Virginia divorce – whether in terms of ratcheting that number above guidelines or pushing it below guidelines – is one of the areas where the flexibility and low cost of divorce mediation should be considered. The “legalese” for this modification of the presumed guideline’s child support number is “deviation.”

Anyone considering deviating from the Virginia child support guidelines amount (especially if that parent is seeking a below-guideline’s number) needs to be aware that courts tend to like formulas. That means that if you do not think that the Virginia guideline’s calculation suits your family’s needs best, you will need to prove it. That means evidence. And that means lawyers and big money (if you choose to litigate instead of mediate).

Further, judges who follow the letter of the law must be very particular about the details of the evidence presented. Child-related matters are highly sensitive – and no judge wants to deny a child the basic support that is presumed needed (at least as far as the Virginia General Assembly is concerned) for anything less than a very, very good reason. (It is notable that the receipt of child support is the child’s right and not the custodial parent’s right. So, technically, even the custodial parent does not have the right to waive child support/agree to a below guideline’s amount of child support on his/her own since it is not that parent’s right to waive the child’s right to financial support!)

Courts are required to abide by the following protocol and criteria if and when there is a request by a parent to deviate from the Virginia Child Support Guideline’s Presumed Amount (pursuant to §20-108.1 of the Virginia Code):

The Court must make written findings that:

A. The application of the guidelines would be unjust or inappropriate in a particular case; and

B. There is justification as to why the child support obligation ordered by the court varies from the presumed guideline amount based on relevant evidence pertaining to: The ability of each party to provide child support and the best interests of the child, as follows:

1. Actual monetary support for other family members or former family members;

2. Arrangements regarding custody of the children, including the cost of visitation travel;

3. Imputed income to a party who is voluntarily unemployed or voluntarily under-employed; provided that income may not be imputed to a custodial parent when a child is not in school, child care services are not available and the cost of such child care services are not included in the computation and provided further, that any consideration of imputed income based on a change in a party’s employment shall be evaluated with consideration of the good faith and reasonableness of employment decisions made by the party, including to attend and complete an educational or vocational program likely to maintain or increase the party’s earning potential;

4. Any child care costs incurred on behalf of the child or children due to the attendance of a custodial parent in an educational or vocational program likely to maintain or increase the party’s earning potential;

5. Debts of either party arising during the marriage for the benefit of the child;

6. Direct payments ordered by the court for maintaining life insurance coverage pursuant to subsection D, education expenses, or other court-ordered direct payments for the benefit of the child;

7. Extraordinary capital gains such as capital gains resulting from the sale of the marital abode;

8. Any special needs of a child resulting from any physical, emotional, or medical condition;

9. Independent financial resources of the child or children;

10. Standard of living for the child or children established during the marriage;

11. Earning capacity, obligations, financial resources, and special needs of each parent;

12. Provisions made with regard to the marital property under § 20-107.3, where said property earns income or has an income-earning potential;

13. Tax consequences to the parties including claims for exemptions, child tax credit, and child care credit for dependent children;

14. A written agreement, stipulation, consent order, or decree between the parties which includes the amount of child support; and

15. Such other factors as are necessary to consider the equities for the parents and children.

At Graine Mediation, we follow similar protocol to the courts when clients are considering a deviation from the Virginia Child Support Guidelines. However, in the Fairfax and Northern Virginia area – where lifestyles tend be quite expensive in terms of the stepped-up extracurricular activities, tutoring, overnight camps, etc. that children are involved in – there is rarely a case where a below-guideline’s child support obligation is agreed to by parents in mediation. (Remember: The guidelines were developed by the Virginia General Assembly for state-wide application – and most Fairfax/Northern Virginia families do not live the lifestyle or raise their children, in terms of dollars spent, like most of the families in other parts of Virginia.) Thus, below-guidelines agreements are rare in my mediation practice. However, above-guidelines deviations are often discussed but, even then, obligating parents to above-guidelines monthly child support amounts are often disregarded in favor of other more practical and creative solutions to award the support necessary while, at the same time, satisfying (as much as possible) each parents’ need for financial stability and control.

Posted by Robin Graine, JD, Virginia Supreme Court Certified Mediator

This blog and its materials have been prepared by Graine Mediation for informational purposes only and are not intended to be, are not, and should not be regarded as, legal advice.  This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship.  Internet subscribers and online readers should not act upon this information without seeking professional counsel.

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Nesting

September 17, 2013

In recent years, parents seeking a divorce have been trying out a new and unconventional living arrangement to maintain what some of them feel is a higher level of stability for their children. This arrangement is known as “nesting”. In most cases, nesting involves the parents rotating in and out of the family residence, while the children remain in the family home full-time.nesting

            Parents may decide to nest for a few different reasons. Some feel that it is in the best interest of their children to keep them in a familiar environment in both home and school. Also, some parents have chosen nesting because the current market makes it economically unattractive to sell the family home. Nesting allows them to “buy time” without either parent moving out full-time.

            Nesting has the potential for creating less disruption in the children’s routines than traditional custody plans that have the children going and back and forth between their parents’ homes.  However, this means that both parents have to travel back and forth between their two homes, which has its own set of stresses.

            Nesting can also be expensive.  If there are no acceptable, free or inexpensive living arrangements for the parents during their “off time” (time not in the family home with the children), the nesting family may end up paying a mortgage and two rents. To avoid these costs, some nesting arrangements involve one parent living permanently in the family home while the other spends occasional nights in a guest bedroom or on the couch.

            That type of nesting, however, has its drawbacks.  First, it can be confusing to children.  Second, there are legal and tax issues with this second type of nesting, such as your state’s definition of “living separate and apart” for purposes of meeting the criteria to get divorced, and the fact that the IRS will not allow alimony payments to deductible for divorced former spouses if they are living under the same roof.

            When considering nesting, parents will need to decide what is in the best interest of the family in both the immediate future as well as long term. While it is good to maintain a familiar environment for children, nesting is often too expensive, too stressful or not a good idea from a legal or tax standpoint.

            Graine Mediation would love to hear from successful nesting parents—leave a comment!

Posted by Zia Meyer, Mediation Assistant

This blog and its materials have been prepared by Graine Mediation for informational purposes only and are not intended to be, are not, and should not be regarded as, legal advice.  This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship.  Internet subscribers and online readers should not act upon this information without seeking professional counsel.

Resource

Sklarew, Renee. “Bridging the Gap Divorced Parents Share Space”.

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Divorce Mediator’s Are Focused on One Thing: Settlement

June 11, 2013

Divorce Mediators are trained to assist divorcing clients through the settlement process.  That is all we do — help clients craft fair settlements and write up those settlement terms in clear, legally binding Settlement Agreements. By focusing only on settlement – without the lure and distraction of flashy legal strategies, courtroom drama, and high stakes positional bargaining (often involving your children) – good mediators keep their clients focused on settling their issues, spotting opportunities and moving on with their lives.

I am a Lawyer-Mediator with several years experience in divorce litigation. This type of background allows me, and divorce mediators with similar experience, to bring to life, in real terms, what may happen if the case is not settled in mediation.  For example, 90-95% of divorce cases settle (meaning they do not go to trial). Therefore, doesn’t it make more sense to try to work on settlement first (where you are ultimately headed, anyway), rather than starting the divorce process with an adversarial posture and legal wrangling?  I can tell you, from experience that, in many instances, divorce cases will drag on for months – or even years – and then, on the dawn of trial, after thousands of dollars have already been spent in attorneys’ fees – the case miraculously settles.  The clients are usually worn out and out of money at that point.  Though it shouldn’t get to that point, it is really only the clients that can stop the bleeding, and that is best done by working on settlement first, and using the adversarial system only when necessary.

Lawyer ethics require that lawyers advocate zealously in asserting their client’s position.  This ethical mandate often spins a case out of control when a little bit of thoughtful goal setting and financial planning by the client, with the assistance of a professional mediator, could have avoided expensive and emotionally draining litigation.  Unfortunately, the vast majority of clients are not experienced in what is appropriate and necessary in a divorce case and, therefore, are relying on their attorney to tell them what needs to be done.  The attorney is then stuck between his or her legal mandate to “zealously represent” his or her client, making enough money to pay the huge overhead that many law firms operate under, and doing what is really best for the client in the long run emotionally, financially and for the clients family, as a whole.  Usually, “zealous advocacy” wins out, especially in today’s legal climate where lawyers are suing other lawyers everyday, for malpractice, in the divorce system.

When is it essential to get the Court involved?  Lawyers and judges are usually necessary in cases where there is domestic violence, child abuse, concealment of assets, or an absolute unwillingness or incapacity for a couple to negotiate, even with the assistance of a professional mediator.  But, aside from those circumstances, there is no discernible reason not to try mediation first, before litigation.  Everything is confidential, in mediation, and, if it doesn’t work out, nothing you have said in mediation can ever be used against your interest in a court of law.  You really have nothing to lose but, maybe, a few hundred dollars (versus thousands of dollars, in the types of cases that I usually handle, just for the attorney’s retainer fee).

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Divorce Mediators, in Virginia, are required to be neutral. We do not advocate for either party, but Lawyer-Mediators, like myself, work very hard to ensure that both parties make informed decisions based on the totality of the facts and circumstances presented by their case. Divorce Mediators are permitted to share information, with their clients, in the following areas, where that Mediator has expertise:

  • Divorce law – statutory, case law
  • Divorce trends – local, national
  • Tax implications of divorce (e.g. alimony deduction, capital gains, gift tax laws in relationship to divorce)
  • Retirement funds – Federal law and application, necessary paperwork
  • Military Law as it relates to military retirement and benefits in a divorce situation
  • Federal law as it relates to federal employee’s retirement and benefits in a divorce situation
  • Effect of divorce on children –adjustment, bonding, talking with kids about divorce
  • Effect of divorce on adult children – relationship skills generally, relationship with parents
  • Child support calculations and deviations from those calculations (above and below)
  • Range of custodial care plans and implementation of those plans

Experienced Mediators are also able to share a variety of settlement options that have worked for other divorcing couples who had similar issues.  Mediation is a creative process, but there is no reason to reinvent the wheel if there is a solution out there, already, that can be tailored to the particular clients’ needs.

In mediation, there is usually not much room for old fashioned, strong arm negotiating tactics, such as:

  • An emphasis on the ground of adultery or other behaviorially oriented matters when it comes to settling property disputes;
  • Pushing the envelope to classify money as non marital property (non divisible by Virginia courts) when both parties clearly viewed it as marital property throughout the marriage;
  • Sudden amnesia regarding known underreporting of income by small business owners (for purpose of calculating support);
  • Tying financial issues to matters of custody & visitation; and
  • Involving other family members in the details of the settlement.

Divorce mediators do one thing:  Help clients settle their cases.  We know how to see things from both perspectives and help our clients to do the same.  Spending a little energy trying on the shoes of the other party helps settle cases faster than digging your heels in. Legally trained mediators know what judges can and cannot do, and what a typical settlement looks like in their area of practice.  But, even though good Lawyer-Mediators know what is going on in the Courthouse, the focus, in mediation, is not on the outside world but on what is right for your family and what is best for you.

All Mediations, the way that I practice, have one clear overriding emphasis: To figure out the best way for both parties and the children to be able to live a comfortable, post-divorce life by finding and taking advantage of as many opportunities presented by the couple’s situation as possible. The idea, at the end of a divorce, is to be happier than you were in the marriage.  Why not?  What else do you have if you don’t have that?  Just a divorce, and that is not an acceptable goal for me and is not a goal orientation that I recommend my clients shoot for, either.

Posted by Robin Graine, JD, Virginia Supreme Court Certified Mediator. Robin Graine of Graine Mediation, is a former divorce litigator and has a busy, private divorce mediation practice in Fairfax, Virginia

This blog and its materials have been prepared by Graine Mediation for informational purposes only and are not intended to be, are not, and should not be regarded as, legal advice.  This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship.  Internet subscribers and online readers should not act upon this information without seeking professional counsel.

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About Robin Graine

May 24, 2010

Robin Graine, JD was originally certified as a Family Law Mediator in 1994 as one of Chicago’s first court-certified mediators. Robin is also certified as a Mediator by the Virginia Supreme Court, at both the Circuit Court and Juvenile & Domestic Relations level and is a nationally certified Divorce Financial Analyst through the Institute of Divorce Financial Analysts. Prior to becoming a divorce and family mediator, Robin spent 5 years as a Divorce Attorney and Guardian Ad Litem (children’s legal advocate) in the Chicago Circuit and Juvenile Court Systems. Her career also includes a 3-year, full-time judicial appointment as a Child Support and Child Abuse Hearing Officer. Since 2009, Robin Graine, JD has owned Graine Mediation, a practice exclusively focused on Divorce and Family Mediation, in Fairfax, Virginia.

Robin Graine, JD’s divorce mediation and litigation practice background includes financially sophisticated cases, military and federal government benefit division and distribution, contested custody issues, upside-down real estate matters, out of state custody arrangements, employee stock option and restricted stock, deferred benefit plans, small business concerns, retirement benefit division, tax issues as they relate to divorce, cases where grounds are at issue (adultery, cruelty, desertion), and cases where clients seek the guidance of a divorce settlement professional to ensure that they have covered all areas necessary and appropriate for their divorce.

Robin Graine, JD is a firm believer that divorce is tough enough without the added stress of litigation. She believes that litigation should be reserved for only those cases where there is a history of domestic violence and/or one or both of the parties refuses to disclose information relating to his or her income and assets. Robin Graine, JD, as a mediator, will ensure that both parties have the information necessary — factually, legally, tax-related, and with regard to the well-being of their children — to make informed and rational decisions related to their settlement.

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