Adjusting Child Support - Help in determining income

[Gilligan]

This is my first year where I have to adjust child support based on a final court order that was issued in 2013. Both my ex and I have exchanged the appropriate information and we are to adjust CS based on this information.

I have a bit of an issue however and would like some thoughts on the matter.

In 2013, I received a substantial amount of retroactive pay for 2010, 2011, and 2012. While I would normally include this increase if child support was payable in those years, but my agreement fixed child support amounts until March 2013, therefore I feel that this retro-active pay for previous years income should not be used in calculating child support.

I am proposing that my annual income for 2013 be used in determining child support (excluding pay from 2010, 2011, and 2012). As a side note, my ex and I share access 50/50, so I pay off-set child support.

Of course my ex is arguing that I should pay based on past years, but I don't imagine that this would be the likely outcome.

Any advice would be appreciated.

Thanks,

[arabian]

I believe that you report income on the year that you receive it. If you received a "bonus" of retro pay in 2013 then you would report it, and be taxed on it, on your 2013 tax returns. I know little about child support but it wouldn't make sense to pay tax on income for previous years if you only received it recently. You can probably google this on the CRA website.

edit - but then the government does alot of things which don't make sense.

I'm sure someone with personal experience with this will respond to your post. I have no experience with child support issues and probably shouldn't even be commenting here.

Your ex spouse might be worried about her tax position but I believe there is a special tax provision for receipt of lump sum child support payments that she might investigate.

[Berner_Faith]

You are essentially saying that you should get away with paying less CS because it was for other years. Essentially you underpaid for those other years. Income is income regardless of when it's paid. You paid a reduced amount for the past year now you either have to provide your ex with retro support or pay going forward.

If you were to receive a bonus in 2014 for work you put in for 2013 would you feel that bonus money should no get accounted for because next year because you already paid your 2013 support and the bonus is now basically free money?

I am with your ex on this one. If it was only 2013 you were separated for I would suggest figuring out how much was for 2013 and provide an arrears cheque for what you would have paid if you had that income then.

[Gilligan]

Child support is tax neutral for the person receiving it, so I pay taxes on my total income and she received this money tax free.

My analogy is that I cannot differ income for child support, so I should not be paying CS based on "differed income".

I should point out that my ex received a lump sum payment for a pension pay out, I consented to not include that as her income. Seems that the same courtesy isn't being returned.

[rockscan]

This page has info re bonuses etc.

http://www.justice.gc.ca/eng/rp-pr/f...fo1.html<br />

[Gilligan]

You are essentially saying that you should get away with paying less CS because it was for other years. Essentially you underpaid for those other years. Income is income regardless of when it's paid. You paid a reduced amount for the past year now you either have to provide your ex with retro support or pay going forward.

If you were to receive a bonus in 2014 for work you put in for 2013 would you feel that bonus money should no get accounted for because next year because you already paid your 2013 support and the bonus is now basically free money?

I am with your ex on this one. If it was only 2013 you were separated for I would suggest figuring out how much was for 2013 and provide an arrears cheque for what you would have paid if you had that income then.

Perhaps I wasn't clear about this. I've been separated for over 8 years with my ex. She recently took me to court, which resulted in a court order that was issued in 2013. This is my 3rd final court order, lots of history.

My child support was fixed for a 5 year period, and was only to open in March 2013. My child support was paid in full as per a final court order up until that time.

Under normal circumstances, yes, I would agree that I would have underpaid child support for 2010, 2011, and 2012 resulting in a possible arrears situation, but paying based on a lump sum would correct that.

I am not trying to cheat my ex out of child support or reduce my obligation, I am trying to get advice on what is appropriate given that I need to adjust my child support on 2013 income.

Although I wouldn't repeat this, my child support was fixed because I consented to a largely un-equal devision of debt. A freeze on child support was supposed to off-set this difference, and it was confirmed and reaffirmed by the judges decision on the matter.

[Gilligan]

This page has info re bonuses etc.

More information on calculating annual income - The Federal Child Support Guidelines: Step-by-Step

It's not a bonus, it was income from 2010 - 2012 that was paid in 2013 because of a collective agreement taking much too long.

Support was paid in full for 2010, 2011, 2012 and was for a fixed sum (court ordered to not change until March 2013).

I am not trying to determine CS obligations for next year.

Canlii is helpful, but my case appears to be somewhat unique in that retro-active child support is not appropriate and including past years income is essentially the same as granting retro-active child support. It negates the clauses in my original order to fixes child support.

My ex took me to court over retro-active child support and the judge dismissed the claim and I ended up with very high legal costs. I am not really inclined to now pay retro-active support when a decision was rendered on this already.

[arabian]

Curious as to why you got a lump sum retro pay for your employment for 3 years. Reason could be important if you end up in court (termination pay, one time?). As long as you weren't deferring income then it would likely just become an income matter (are you a Director in the company that paid you the 'retro pay', for example?).

[arabian]

We posted at the same time so you answered my question. Thank you.

Might come down to the wording of the collective agreement.

Your pay was essential adjusted for 2010 - 2013 was it not?


You received retro pay and your ex will likely receive retro pay for the difference.

Interesting but I'm sure your situation is not unique. Collective agreements with retro pay clauses are everyday things. You could check with your union and get some free legal/financial advice under your benefits plan.

Please do post again and share the information you receive.

[Gilligan]

My pay wasn't really adjusted. I received a supplemental pay in 2013. The pay included a payment for 2010, 2011, and 2012 (and a small adjustment to 2013, which I am happy to include in my CS obligations).

So, my annual income for 2013 is known. I am just not wanting to include previous years income for my CS payments, since those years were fixed and are not to be revisited.

[Gilligan]

Interesting but I'm sure your situation is not unique. Collective agreements with retro pay clauses are everyday things. You could check with your union and get some free legal/financial advice under your benefits plan.

Arabian, thanks for your feedback. What is unique in my case, which isn't the norm is that my child support amounts were fixed for previous years.

So, in cases where people receive a lump sum, their child support obligations would vary from year to year, and if you received a lump sum, this could be used instead of retro-active support. In my case, it was explicit that CS was fixed in previous years.

[stripes]

Not a tax expert here, but it seems to me that you should pay CS based on line 150 of your 2013 income, regardless of when you did the work for which you received the income. An analogous situation: I receive royalties which go into my line 150 income. The royalties are often lagged, so royalties I receive in 2013 are for sales which happened in 2011 or 2012, for a work which was published in 2010. The CS I pay is based on what went into my bank account in 2013, even though the money was technically earned in earlier years.

So if your retro pay shows up on your T4 (and your bank account) for 2013, I think it should go into CS calculations for the year ahead. I wouldn't call this an "adjustment" to previous years CS, as the amount was fixed and so what was on your line 150 in those years was irrelevant. Presumably next year you will adjust CS again and your payments will decrease then.

[blinkandimgone]

If the income was specifically designated to those years, would you not be able to request a re-issue of your T4's for those years with the adjusted amounts and then have your taxes reassessed for those years to reflect the accurate amounts?

Just curious.

[Links17]

I don't agree with other poster, that income was for work done in previous years and paid to you retroactively.

You had an agreement that covered those years, it would be unfair due to some unrelated t work issues that the pay of years 2011,2012,2010 be considered part of 2013. I would argue your case is unique because you had a special agreement for those years but you need to prove imo beyond a reasonable doubt that the source of that income is retro pay for 2010,11,12

That's my 2c

[Berner_Faith]

I don't agree with other poster, that income was for work done in previous years and paid to you retroactively.

You had an agreement that covered those years, it would be unfair due to some unrelated t work issues that the pay of years 2011,2012,2010 be considered part of 2013. I would argue your case is unique because you had a special agreement for those years but you need to prove imo beyond a reasonable doubt that the source of that income is retro pay for 2010,11,12

That's my 2c

Which would be easy if his employer issued him new T4 slips with the adjusted income. If it really was for the years before his employer would have no issue doing this.

His case is unique but was CS determined and fixed on a certain income level at that time? If so, was this increase included in the initial calculations? That could play a part in this as well, as if it was not taken into consideration then it shouldn't be excluded.