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-   -   Ex runs home daycare (net income calc for support?) (https://www.ottawadivorce.com/forum/showthread.php?t=21391)

cashcow4ex 10-17-2017 07:46 AM

Ex runs home daycare (net income calc for support?)
 
Good morning,

Synopsis:
Divorced in 2009. 2 children who live with their mother. Been paying table child support since. Currently paying close to $1800 a month.

One of my children has decided they want to live with me. All the changes are pretty much agreed upon with the exception of her income to calculate the offsets for support. My ex runs a home daycare and is stating that she will be using her net income after all deductions for support calculation. Based on this it would take her income from about $55,000 to about $20,000.

I am willing to except deductions which are for the daycare such as food and craft supplies (she doesn't have or keep any receipts) but I don't think she should be allowed to deduct mortgage, utilities, car expenses (5 kids plus her and she drives a compact car) and everything else that a home business can deduct.

I have looked on the CRA website and can not find clear guidelines to refer her to for calculating income when self employed. Also, what should I be asking her for as far as tax documents go so I can get started on calculations at my end?

Any help is appreciated.

rockscan 10-17-2017 07:57 AM

You could try a search of canlii for cases of self employment and deductions. Do these expenses come out of her line 150? If they dont then she should be using her line 150. Its no different than some of the cases of truckers making 200g per year and claiming their income of 20 g because of expenses.

cashcow4ex 10-17-2017 08:00 AM

I will request her NOA and see what her line 150 says. My line 150 has my total income even though I have lots of business expenses so I can only assume hers would too.

I am heading over to peak at that website you suggested now.

mafia007 10-17-2017 10:13 AM

Quote:

Originally Posted by cashcow4ex (Post 224358)
I will request her NOA and see what her line 150 says. My line 150 has my total income even though I have lots of business expenses so I can only assume hers would too.

I am heading over to peak at that website you suggested now.

When you are self employed, you cannot use line 150. An analysis must be made to add income and/or to remove expenses that would not be allowed as they are not really considered expenses... such as depreciation, there is no cash out in this matter.

My ex spouse run a daycare as well and I had to impute her a revenue as she was stating making only less than 20K as per line 150 but claiming a gross of over 40K. At time of separation, she always made a gross of over 40K so there was no problem for me to impute her a salary at 32K a year. This was reasonable as she accepted before we went to trial. I am still paying 70% and + for special expenses so her contribution is fair.

Here is a good case on CanLii to impute a revenue for operating a daycare: Philippe v. Bertrand, 2015 ONSC 235 Link: http://canlii.ca/t/gfxvv

Of course you need to do your maths. Make sure you ask for full financial disclosure by requesting the following;
1- Notice of Assessment NOA
2- Income Tax Return T1 General
3- Income Statement for operating a business form T2125

Also, make sure you know what is her education, her expertise field, qualification/experience and where she worked before. Try to find similar job in the area and the expected salary. It's better to show the judge all the options so he can make a decision.

arabian 10-17-2017 10:19 PM

Thank you Mafia007. A business is a business. If one party objects to Line 150 being used then, if properly motioned, court determines whether or not there are business expenses which should or should not be be added back to determine income (for purpose of paying support). Sometimes business expenses are added back and other times they are not.

trinton 10-18-2017 12:25 AM

and many times daycares take cash.. and never claim it to avoid paying tax, meanwhile claiming their morning coffee as a business expense.

go by her revenue. after all, child support is based on before tax revenue.

cashcow4ex 10-18-2017 07:50 AM

That is sort of my thought process too. I am fully prepared to except all costs directly attributed to the daycare however she is not willing to look at any of her expenses stating she is going to calculate her support on her net income.

Why should she get to deduct housing costs, vehicle costs, cell phone costs when those same costs are a fact of life for everybody. If she didn't have the daycare would she be living on the streets and without a vehicle or cell phone...not a chance! I have to maintain a home office, a vehicle and a cellphone to accomplish my job yet those claimed expenses get tossed out the window straight away.

To add a little perspective, this is the same women that requested $150.00 a month for dog support on top of the spousal support and child support she was looking for. She also tried to claim her boyfriends winter tires as a section 7 expense because the kids would from time to time ride in his car. She also was seeking half of what my companies compensation would be to me if I had gotten fired on the date of separation claiming that was an asset incurred during the marriage and that she was entitled to half of it.

arabian 10-18-2017 09:13 AM

During divorce binding arbitration my ex tried to claim all sorts of things but was shot down by the judge. Instead, business operating expenses were carefully established based on years and years of financial documentation. Judge was quite firm that what was claimed at tax time was not a relevant indicator, for self-employed individuals, for determining income for purpose of support. I recall ex's lawyer having to take ex aside and straighten him out. I also recall being quite surprised myself as I thought a payment for a semi-tractor/trailer would be an allowable business expense but it was not as ex was sole-proprietor and the equipment was determined to be his asset (also ex was unable to provide a finance/lease document as he already owned equipment outright and only provided a hand-written note from his sister stating she had lent him the money to borrow the unit). Judge looked closely at non-arms' length business transactions involving his g/f and family.

I should add that, to my knowledge, ex has never been audited by CRA.

cashcow4ex 10-18-2017 09:27 AM

That sounds a little promising. I just hope she actually comes to her senses and realizes that her salary base point is basically line 150 and all business expenses are determined after that point.

I wonder, if she refuses to budge could I make a claim to have my court costs covered by her?

trinton 10-18-2017 09:31 AM

Quote:

Originally Posted by cashcow4ex (Post 224405)
this is the same women that requested $150.00 a month for dog support on top of the spousal support and child support she was looking for.

I found her.

http://insider.si.edu/wordpress/wp-c...inal-leech.jpg

cashcow4ex 10-18-2017 09:36 AM

Quote:

Originally Posted by trinton (Post 224413)

LOL...too true. The most narcissistic person you could possibly meet.

cashcow4ex 10-27-2017 09:00 AM

I have an update,

My ex who still thinks her child support payment should be based off her net income, yet who hasn't spoken to a lawyer or done any research has decided she will in the meantime start writing cheques to me in the amount for child support that the calculator says she owes based on her net income.

I mentioned that I would prefer just to keep paying her full child support for both children until the ruling or mediation is done. She could then write me a cheque for what she owes from when the time my son moved in with me.

Any advice on whether I should cash these cheques or just wait until we know what she truly owes would be appreciated! I don't want to set any kind of status quo's or anything like that.

Tayken 10-27-2017 09:33 AM

Quote:

Originally Posted by cashcow4ex (Post 224415)
LOL...too true. The most narcissistic person you could possibly meet.

As I recall this is the same person who demanded that you pay for a service at her property to pick up the dog poop.

cashcow4ex 10-27-2017 09:35 AM

Quote:

Originally Posted by Tayken (Post 224696)
As I recall this is the same person who demanded that you pay for a service at her property to pick up the dog poop.

The one and only!

Tayken 10-27-2017 09:40 AM

Quote:

Originally Posted by cashcow4ex (Post 224692)
I have an update,

My ex who still thinks her child support payment should be based off her net income, yet who hasn't spoken to a lawyer or done any research has decided she will in the meantime start writing cheques to me in the amount for child support that the calculator says she owes based on her net income.

I mentioned that I would prefer just to keep paying her full child support for both children until the ruling or mediation is done. She could then write me a cheque for what she owes from when the time my son moved in with me.

Any advice on whether I should cash these cheques or just wait until we know what she truly owes would be appreciated! I don't want to set any kind of status quo's or anything like that.

1. Child support is easy to calculate online (MySupportCalculator.ca)

2. She is indeed obligated to pay you support for the child residing the majority of time with you.

3. Line 150 is what you generally base the payment on.

4. You are still obligated to pay her child support for the child residing with her.

5. If you are the higher income earner you can use the calculator (provided in #1) to calculate what you should be paying less the difference she should be paying you.

6. You can cash the checks. They are an acknowledgment that she owes child support. So, the status quo that has been established through her conduct is that you are the majority access parent to this child. (Bad move on her part!)

7. If you have her T4 or NoA for the past year then you can do #5 if you are the higher income earner and simply not cash her checks. Her contribution to CS is recognized in the reduction in total CS she gets. She just gets it for the child that resides with her.

If you are not arguing about whom the majority access parent is for each child, it really is a simple number to calculate and quite standard stuff.

Good Luck!
Tayken

Tayken 10-27-2017 09:44 AM

Quote:

Originally Posted by cashcow4ex (Post 224697)
The one and only!

Still one of the best posts ever on this site!

cashcow4ex 10-27-2017 09:57 AM

In most cases line 150 is the standard however our Gov't in all the infinite wisdom left a lot of grey area when it comes to home business and self employed.

The issue is she runs a home daycare and has business expenses (daycare food, business insurance and advertising) which I am willing to except as genuine expenses however all the other deductions she gets fro tax purposes (mortgage, car payment, car insurance, utilities) should be added back into her salary for child support purposes.

There really is no debate as to who the primary care giver is of my son who is 16. The only real area of contention is what number she wants to use as income to calculate her child support.

So your saying the smarter play is to except the smaller amount checks, cash them and collect the difference when her income is calculated accurately?

mafia007 10-27-2017 10:15 AM

Quote:

Originally Posted by cashcow4ex (Post 224701)
So your saying the smarter play is to except the smaller amount checks, cash them and collect the difference when her income is calculated accurately?

YES, as per Tayken, cash the checks to show that you need the money for the child. As it is the right of the child to receive those funds, if she still owes you money according to the table, she will be in arrears. No big deal about it. Never the court will set a status quo on money that are due for the sake of the children. If she did not made payment according to the table, there would be an adjustment. Lower payment will result in arrears and higher payment will result in a credit to her.

All you need to do, and I think you did already, is to tell her that you will cash the checks for now until the actual salary is imputed to her as a daycare provider. She is aware that you think she should be paying more. That's all.

When you were paying, did you had a relief of any kind? Why would she get some today?

piggybanktoex 10-27-2017 10:53 AM

Wow,

My ex demanded, during separation, an amount of $1,500 per month to cover kids underwear and socks while receiving $200,000 net per year from me.

That ties the "dog support" entitlement.

After I stopped laughing, I said NO.

cashcow4ex 10-27-2017 01:00 PM

Hey...kids need to be sporting Gucci and Prada nowadays lol

cashcow4ex 11-06-2017 11:54 AM

UPDATE: Nothing has been finalized, no financial statements from ex yet, Ex still believes because of the home business she runs that child support is all based on her net income.

With that said, I did receive the first bi-weekly cheque for child support which she is paying in the interim until this is all settled either through mediation or court. If I reverse input the numbers in the calculator the EX is basing it off a salary of under $13,000 a year!

FYI:
In the EX's area Daycare costs are:
$40.00 a day, times 5 kids allowable, times 5 days a week gives her a potential gross salary of $52,000.

I am hesitant to use a mediator because I would be paying half of the mediation bills and I have a hard time believing that a mediator will be able to convince her that she is going against the Fed Child Support Guidelines and that her interpretation of everything is false. You would think that a simple quick internet search on her part should be enough to make her realize that she is wrong. So In your opinion, if this went to court, how likely would my chances be if I request my court costs to be covered?

arabian 11-06-2017 02:47 PM

You have to be careful that your figures are correct. You are calculating on a weekly basis. Many people take a few weeks off during Christmas as well as a vacation. You should therefore alter the gross amount to reflect that. She will be allowed some consideration for use-of-home expenses, but not necessarily what CRA would allow. The more accurate you can be with your own figures the better your argument in court. Think "business operating expenses" - which she would have to pay whether or not she operated her business from home or not.

If you do the math correctly then I do not see why you would not be successful. Matters such as these rarely end up in court and are settled. You could look at decisions from your local jurisdiction and see what sort of costs are awarded. I know I was quite surprised in my area to learn that costs, when awarded, are typically very small and did not come close to covering legal costs. In Alberta, at the back end of the Rules of Court, there is a schedule which shows amount judge awards in costs. I don't know if you have the same information where you live.

Tayken 11-06-2017 03:16 PM

I believe to Arabian's point there is some tax guide information about how the government tracks home daycare business. Just like how servers can't get away with claiming 0$ in tips on their taxes... I think there is an expectation of income for a daycare that they use for tax guidance.

Newfie76 11-06-2017 09:26 PM

Quote:

Originally Posted by arabian (Post 225089)
Many people take a few weeks off during Christmas as well as a vacation. You should therefore alter the gross amount to reflect that. She will be allowed some consideration for use-of-home expenses, but not necessarily what CRA would allow. The more accurate you can be with your own figures the better your argument in court. Think "business operating expenses" - which she would have to pay whether or not she operated her business from home or not.

Hold on here now.....In the Ottawa area, at least, 99% of daycare locations charge on a school year basis and then on a summer (per week used basis). The school year is normally charged in full including weeks the client takes for vacation and xmas holidays. Even if the provider takes a week off the client is charged.

As far as wright-offs......The % of space used in the house against interest on mortgage and utilities. Cost of food for lunches, minor repairs around house. Insurance, advertising.....and maybe car costs.

Based on write offs, summer time vs school time and number of clients fluctuating throughout the year....I through a dart of approx $35,000/year net estimate. $40,000 if she really does well...and pushes the business.

trinton 11-06-2017 09:55 PM

I would meet with other daycares in town pretending to be interested in their services and see what their rates and policies are. Meet with 2 or 3, and note down what they told you and compare to what your ex is saying claiming.

cashcow4ex 11-07-2017 08:41 AM

Very good points. I know she does make the parents sign a daycare contract. Might be worth getting a copy of it. I also know 1 week of her 2 weeks are paid holidays, as is all time off at Xmas. Newfie is right, the daycare's in the area have pretty solid contracts to ensure the parents secure the child's spot.

Here is my plan and please let me know if I am making a mistake.

Once I get her 3 years of financial info, I will use the Fed Gov't work sheets and do my own assessment of each year of what her gross should be. This would be removing all tax deductions strictly attributed to the daycare such as (food for children, advertising, business insurance, arts supplies) based on receipts or Provincial averages for these types of deductions.

All tax deductions that I will be adding back into her salary (mortgage interest, insurance, car payment interest, gas, utilities, home and auto repairs) will be added back in with the top of rule. Meaning for every dollar that gets added back into her salary gets topped up with what ever percentage of tax bracket she is in.

Once done I will then provide her with a copy of everything I have calculated to show her how I got to these gross incomes for the past 3 years.

So here is where it gets a little confusing for me. I know how to calculate the off sets as we each have 1 child full time. At the moment I am still paying full table support for both children and she is paying me support based on her net income of about $13,000. The support I have received from her is less that $150.00 a month

So, do I go ahead and adjust the child support I am paying her by subtracting the amount she should be paying me based on the gross salary the Fed Gov't work sheet provided me and let her deal with it if she has an issue? Or do I have to continue paying full table support for both children until this is all settled.

My concern is that this wont be settled for some time if this goes to mediation or court and paying $1,800 a month in full table child support while receiving less than $150.00 a month in return makes it difficult to properly support the child I have, not to mention she is still receiving the child tax benefit for both children.

Trying to keep this away from lawyers or the courts so I am open to all advice on if this is how I should proceed.

arabian 11-07-2017 10:10 AM

You need financial disclosure, particularly to show that she is charging 40.00/day (she may be charging 30.00/day).

I guess what your asking is if you proceed with self-help measure (rather than waiting for direction/Order of the court)? If you do proceed with self-help I'd make sure you squirrel the difference away in the event that you are unsuccessful. On the other hand, it may be unlikely that she be ordered to reimburse you the over-payment and even if she was it may be difficult to collect (there are threads on this forum about whether or not it is permissible to simply deduct what one party owes the other party from current payment).

Make sure that your figures are realistic - how much money does it cost to feed 5 children 5x week? Don't forget to add in "sundries" such as diapers and other supplies... cleaning products.

When she balks at it, offer a carrot ... allow utilities?

arabian 11-07-2017 10:22 AM

might be interesting to find out if she applied for and received any government business grants to open the daycare (they are available). If so, she would have likely had to provide a business plan. This business plan would be invaluable to you.

cashcow4ex 11-07-2017 10:28 AM

Quote:

Originally Posted by arabian (Post 225116)
You need financial disclosure, particularly to show that she is charging 40.00/day (she may be charging 30.00/day).

I guess what your asking is if you proceed with self-help measure (rather than waiting for direction/Order of the court)? If you do proceed with self-help I'd make sure you squirrel the difference away in the event that you are unsuccessful. On the other hand, it may be unlikely that she be ordered to reimburse you the over-payment and even if she was it may be difficult to collect (there are threads on this forum about whether or not it is permissible to simply deduct what one party owes the other party from current payment).

Make sure that your figures are realistic - how much money does it cost to feed 5 children 5x week? Don't forget to add in "sundries" such as diapers and other supplies... cleaning products.

When she balks at it, offer a carrot ... allow utilities?

I am not following. If she is supposed to be paying (say $550.00 a month) and is only arbitrarily paying about $140 a month and say this drags on for another 6 months.
That $2460 that has been shorted on child support over 6 months could potentially not be owed on her part?
Collecting it would be easy as far as I am concerned. I would just reduce the amount of off set child support I would pay her until its paid up.

I am currently waiting on the financial disclosure and will use those figures unless some of the deductions are not inline with provincial norm's. For example, during our first mediation when we separated she tried claiming $15 a day per child for food.

As far as the other stuff, $40 a day is actually on the low end here in Ottawa. No sundries are provided by the daycare. The parents are responsible for most of everything. A snack, lunch and snack are provided which if I am not mistaken would cost about $6 per child per day. I do understand that usage of toilet paper, tissues and such increases with a daycare.

cashcow4ex 11-07-2017 10:29 AM

Quote:

Originally Posted by arabian (Post 225117)
might be interesting to find out if she applied for and received any government business grants to open the daycare (they are available). If so, she would have likely had to provide a business plan. This business plan would be invaluable to you.

Sadly no...we were together when she started the daycare. I will try to get a copy of the daycare contract though.

rockscan 11-07-2017 11:33 AM

The day care contract will be important. Most day cares still require payment for sick days and vacation. They can get away with it because there is a shortage of in home day cares.

I would think that you could reasonably subtract food and utility costs as well as proven supplies costs. These will depend on the contract though too. My siblings are required to provide milk, two snacks, kleenex, cleaning supplies and all diapers and related changing stuff to their daycares. What she subtracts for revenue canada is not necessarily allowed for these businesses. Keep in mind too the government changes to in home daycares. Ontario only allows five children limited to only two under two.

As far as shorting the cs while this is going on, she could file with an enforcement agency if you have an amount in your original agreement. That may backfire on you.

cashcow4ex 11-07-2017 01:32 PM

Quote:

Originally Posted by rockscan (Post 225121)
The day care contract will be important. Most day cares still require payment for sick days and vacation. They can get away with it because there is a shortage of in home day cares.

I would think that you could reasonably subtract food and utility costs as well as proven supplies costs. These will depend on the contract though too. My siblings are required to provide milk, two snacks, kleenex, cleaning supplies and all diapers and related changing stuff to their daycares. What she subtracts for revenue canada is not necessarily allowed for these businesses. Keep in mind too the government changes to in home daycares. Ontario only allows five children limited to only two under two.

As far as shorting the cs while this is going on, she could file with an enforcement agency if you have an amount in your original agreement. That may backfire on you.

Thanks Rockscan

There is no set amount in our separation agreement other than it says I am to pay table support for both children as I was an every other weekend father. This has changed now that one child lives with me and one with her.

By not adjusting the full table support I am paying her once financial disclosure is received and those numbers are known, Would I not be knowing and willingly jeopardizing the well being of a child in order to maintain a temporary status quo? Couldn't this also be a case of a parent disrupting another parents parenting time as well and attempting to alienate the other parent by simply holding out on amending support till the child has had enough and decides to move back in with the other parent because life is more financially supportive there? Its a stretch I know!

This is purely frustration at the system and not you fine folks!


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