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Financial Issues This forum is for discussing any of the financial issues involved in your divorce.

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Old 09-08-2009, 12:13 PM
thistoshallpass thistoshallpass is offline
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Default What's included as income

My friend is about to go to court after 18 months of delays by her ex ( changed lawyers after first case conference) for CS and SS, her ex tells her that CS and SS is only calculated on his base salary not his overtime or bonuses. He is also trying to have the CS and SS set on this year’s income as his company was on 10 weeks short time, work sharing during the summer. Now he is getting back to working full weeks with overtime beginning shortly. Last years income and two previous years was up over $85,000, he only wants to pay CS and SS on the premise that he may be down $20,000 in income for this year. Does the Judge look at the fact that although his earnings may be down to date this year would he set CS and SS on the current income. or will he take in to consideration the past 3 years earnings and the fact he is now back to full time work and potentially has the same earning power as in previous years.

Anyone had a similar experience.
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Old 09-08-2009, 02:15 PM
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CS/SS is calcated based on income - it of course does not matter how it is achieved. Of course that is only fair if the CS/SS is update every year based on the previous year income.

As for taking the previous 3 years income - I don't agree with this, though I have heard it is a method that is used.

All marital things are split, so CS/SS should be based on current income and of course adjusted yearly according to income tax returns. Given this, the real question is, what about the first year of CS/SS? Well, you could use the last year income tax return if there is nothing to go on, or you could use current estimate of income (a paycheck). If you use a current income method and you are not sure it is accurate, then you can simply agree to go back and recalculate it when the tax return is done and then one pays the other the amount of over/under payment - simple and fair.

Note that it seems that lawyers/courts want to fix the CS/SS amount and then have you fight over it again when there is a 'substantial change in circumstance' which of course is a crap idea and leads to more lawyer fees etc and is inheritently unfair to one of the two.

If you base CS/SS on what is actually made every year, then it is fair, and there should be no fighting (or at least less). Maybe a clause in the agreement that if tax return information is not provided to do the calculation every year then payments will be retro to when the new calcultion should have been done (yearly) AND SS stops if the receiver does not provide tax info, or there is a penalty to the payor if they don't provide it.
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Old 09-08-2009, 05:26 PM
thistoshallpass thistoshallpass is offline
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Default Not always fair

As much as I agree that current income should be a factor in establishing CS and SS and would be fair under normal circumstances. In a situation like this where the payer has procrastinated and made every effort to avoid his responsibility. It would seem fair that a Judge would take into consideration past years income.

As I mentioned in my first post, my friends ex delayed this case going to court until the first case conference in late March. Turns out he knew well in advance that there would be cut backs at work staring the beginning of March of this year. This tactic was to cover that he was already on short work weeks. He has stalled every attempt she has made to get this into court. As a result there has been no court ordered CS or SS. He did pay CS guideline amount for 8 months Feb-Sep last year, based on 2007 income for 2 bio children ages 2 and 8yrs not for his step daughter, although he has been dad to her for 9 yrs, she is now 14. He refused to pay CS for her and refuses to pay SS. My friend dropped out of collage to be a stay at home mom agreed to by both for past 9 years. Last November he arbitrarily cut back the CS he was paying for the 2 kid’s to reflect what he felt he would be making come March this year. As for equalization they did not own a home, he did get half the furnishings and took both vehicles and their camper. His reasoning behind this was that the debt for these vehicles was half hers and that he was forgiving her half of the debt in lieu of SS. Except he still has the vehicles.
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Old 09-08-2009, 06:39 PM
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This year's support payments are based on last year's income tax return. Next year's support payments will be based on this year's income tax return, etc etc.

If he has lost some income due to cutbacks at work, he should get a break for it next year.

The problem with the system, of course, is that he has less money now, his support payments are higher. Next year he has more money and his payments will be less.

The parent receiving support will complain next year that she is receiving less while he is earning more. There will no doubt be no end to the bickering.

If his income is really randomly up and down, it is really fair to both parties to use a 3 year average so they both know how much support to expect and budget for it. Sometimes that will work to one party's favour, sometimes the other.

If he had one bad year, and is trying to base everything off of that, it's not fair.
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Old 09-08-2009, 07:35 PM
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Quote:
Originally Posted by Mess View Post
...
The problem with the system, of course, is that he has less money now, his support payments are higher. Next year he has more money and his payments will be less.

The parent receiving support will complain next year that she is receiving less while he is earning more. There will no doubt be no end to the bickering.
Yes, it requires a person who can grasp this simple concept - there is no reason to bicker - it all works out, but if one or the other are stupid there will be bickering.

Do you have a better way to adjust the CS other than this? Everyones income changes, and it seems to me that CS needs to be adjusted yearly to reflect this reality.
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Old 09-09-2009, 05:00 AM
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I prefer the idea of a 3 year average, I notice you stated you didn't agree with that but you didn't say why.

Looking at 2 examples. First, someone with a steady job, but due to this year's economy loses overtime and gets a 4 day week, but next year should be back to normal. So with the averaging, there would be a reduction but not a drastic one. This gives some stability to the receiver, the payer gets a break which is extended over 3 years and adds up to a fair reduction over all. Under the current system the payer wouldn't get a break until the following year anyway, so never get's the break when it's actually needed.

Second example, self-employed with income up and down from year to year depending on business, competition, costs, etc. It's more fair to the receiver to know what to expect each year. It's more fair to the payor to be able to plan, and it will even out over the years so there is no loss. The payor's rent or mortgage costs stay the same each year, so do the support costs, this is a normal fact of life when (like me) one is self-employed and income varies year to year. You have to budget, put money aside in good years, etc.
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Old 09-09-2009, 09:37 AM
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Quote:
Originally Posted by Mess View Post
I prefer the idea of a 3 year average, I notice you stated you didn't agree with that but you didn't say why.

Looking at 2 examples. First, someone with a steady job, but due to this year's economy loses overtime and gets a 4 day week, but next year should be back to normal. So with the averaging, there would be a reduction but not a drastic one. This gives some stability to the receiver, the payer gets a break which is extended over 3 years and adds up to a fair reduction over all. Under the current system the payer wouldn't get a break until the following year anyway, so never get's the break when it's actually needed.

Second example, self-employed with income up and down from year to year depending on business, competition, costs, etc. It's more fair to the receiver to know what to expect each year. It's more fair to the payor to be able to plan, and it will even out over the years so there is no loss. The payor's rent or mortgage costs stay the same each year, so do the support costs, this is a normal fact of life when (like me) one is self-employed and income varies year to year. You have to budget, put money aside in good years, etc.
So you are saying to adjust CS every year, but use a three year rolling window (CS based on the previous 3 years of tax returns)? That does sound like a good idea, and it did not occur to me, though I knew that courts use the 3 year to set CS initially, I never thought of using that method for yearly adjustments. Sounds like a good solution. Of course as you mentioned, it may cause bickering as CS catches up to significant changes in income, but as I said that would only be a problem with stupid people

I said I didn't like the 3 year method, but I meant when you use it as a starting calculation for CS right after initial separation. I don't like it because it would be best to use your actual income if you can determine it as a starting point. If you use the last 3 years it can be unfair given that you just split all debts and assets equally, so the income that was earned over the last three years has already been accounted for. If you now make much less (which can happen during a divorce and/or when you start to take care of your kids more), then it is not a fair way to start, or visa versa. Does that make sense to anyone?
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