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Divorce & Family Law This forum is for discussing any of the legal issues involved in your divorce.

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Old 06-13-2017, 11:04 PM
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Default Daycare payment issue

Hi all,
My ex and I have recently had to settle a daycare payment issue going back five years. Long story short, it was discovered that he had been paying his proportionate rate of the full daycare amount when it should've been the net daycare amount for the last couple years, but also drastically underpaid the first few years of the payments. It turns out we break even in the end.
Going forward we are trying to figure out how to add the daycare amount onto the monthly child support. He owes a certain percentage. My lawyer says the "common" way to do it is to base it on the net amount for 2016 - divide his proportionate share over 12 months and then just settle up at year's end if someone was under or over when actual numbers can be crunched at tax time. My ex says he doesn't think this is a fair way to determine it but also hasn't offered any solutions. He did not make his daycare payment last month as this issue is "unresolved" to him therefore he isn't paying until it is. So frustrating as he obviously owes something. Any suggestions?


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Old 06-13-2017, 11:29 PM
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I would keep it seperate from CS.

Figure out what percentage each of you must pay (including tax adjustments ).

Give him reciepts at the end of the month and he pay his proportionate share to you within 15 - 30 days based on that percentage.

Last edited by trinton; 06-13-2017 at 11:33 PM.
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Old 06-14-2017, 03:33 PM
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It will be separate from child support as that goes through FRO and daycare doesn't. He is struggling with it being based on last year's numbers even though I've agreed that it should all be rechecked at tax time and adjustments could be made then if the percentage was either over or underpaid.


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Old 06-14-2017, 03:45 PM
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How would you determine net cost? AFAIK the tax reduction specifically attributed to the child care expense is not indicated anywhere on your tax return or NOA.
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Old 06-14-2017, 05:21 PM
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Net daycare would be full cost minus tax credit. You'd have to do the actual tax return with the childcare claimed and then complete one with childcare expenses removed. The difference in the returns would be the net daycare. I think. At least this is how it was explained to me. From there you could figure out what the monthly rate should be for the next year. It seems like a tedious way to do things. This is why I am wondering what other people do to find the correct amount when the daycare payment is based around percentages.


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Old 06-14-2017, 05:23 PM
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Quote:
Originally Posted by dinkyface View Post
How would you determine net cost? AFAIK the tax reduction specifically attributed to the child care expense is not indicated anywhere on your tax return or NOA.
The usual recommendation is to calculate your taxes twice. Do one calculation with everything, and do another with the child care expenses removed. See what difference it makes in the refund/owing. That's what's due to the tax reduction on child care expenses. It's easy to do if you use tax prep software.

Of course, sometimes you might have to trust your ex to do this and report the correct amounts.
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Old 06-14-2017, 05:26 PM
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Quote:
Originally Posted by dinkyface View Post
How would you determine net cost? AFAIK the tax reduction specifically attributed to the child care expense is not indicated anywhere on your tax return or NOA.
The easiest way is for the person who claims the child care deduction is to prepare their returns twice, the first time with the claim and the other without. Subtract A from B, and that is the amount attributable to child care.

You then subtract that amount from the gross annual cost of child care, divide by 12, then split proportionally to income.
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Old 06-14-2017, 05:31 PM
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Originally Posted by Ange71727 View Post
It will be separate from child support as that goes through FRO and daycare doesn't. He is struggling with it being based on last year's numbers even though I've agreed that it should all be rechecked at tax time and adjustments could be made then if the percentage was either over or underpaid.
It is kind of vague, and I could see how a non-math person might balk at it.

Figure out what sort of difference there was in past years for net vs total expense due to the tax reduction. Say you generally get back 10% in your taxes. So offer for him to pay 90% of his proportionate share of the monthly expense, and then work out any lingering over/under after tax time.

He doesn't want to pay you 100% of his normal share of the full cost and assume you'll pay him back his 'overpayment credit' once you determine the net cost at tax time.

You want him to pay you SOMETHING. Tell him that paying zero is nowhere close to what the proper amount will end up being.
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Old 06-15-2017, 08:30 AM
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Daycare is paid proportionately to your income. We have daycare providers that do direct debit based on that split monthly. Daycare is not paid to either parent its paid to the daycare and you each get a receipt accordingly for tax purposes. No need to make this difficult.


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Old 06-16-2017, 07:25 PM
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Daycare is paid proportionately to your income. We have daycare providers that do direct debit based on that split monthly. Daycare is not paid to either parent its paid to the daycare and you each get a receipt accordingly for tax purposes. No need to make this difficult.


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This is not how my children's daycare does it. In fact, they have told me that they don't want the hassle of this as there is a 3rd child with my new husband and they don't want to separate the bills each month. Also, I'm pretty sure that only one person can claim the childcare on their taxes so how would he get his refund if he can't claim it? Even if he could claim it, our agreement states that I am the only party who receives the tax benefits.


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