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Net costs vs Gross cost in regards to proportionate share of daycare

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  • Net costs vs Gross cost in regards to proportionate share of daycare

    Ok so my ex is out for blood and thinks that I am ripping him off in regards to his share of daycare costs. He has a lawyer on my butt and is saying that I owe him money.

    Apparently, as I have been told by his lawyer, he is only required to pay the net cost of daycare fees. What the heck does this mean? We have a separation agreement that states he is to pay 65% of daycare costs. I am very confused by all of this. He is saying that he has over paid for 3 yrs and is demanding that I provide my income tax return documents with attachments. I wasn't aware that he could do this since he clearly agreed to 65% of the costs. The agreement doesn't say anything about those costs being net or gross. I always provide him with receipts so I am not hiding anything from him. Our agreement was drawn up by a mediator and was reviewed by each of our lawyers back in 2006.

    So if he is able to go back and demand re-payment for what is supposedly his over payment to me, does that mean I can have him make retro child support payments? I have asked for his income info in the past and got the run around. I just left it alone because it wasn't worth the hassle.

    Also, it is my understanding that he is to follow the current agreement until the amendment is agreed to and signed. He has refused to pay his share of the $1293.00 summer camp bill I had to pay to secure care for our daughter. This will be the second year that she attends camp for child care purposes.

    He has made it increasingly difficult to correspond with him. He doesn't return phone calls or e-mails. The only thing he will say is "forward it to my lawyer". I did that and got chastized by his lawyer for bothering her with irrelevent paper work and accused of trying to create a large expense for her client.

    And before anyone mentions it, a lawyer is a luxury I can't afford & I make too much to qualify for legal aid. If someone could clear this up I would be greatful. Atleast I would know what is fair and just when I correspond with his lawyer.

    Any advice or thoughts would be greatly appreciated

  • #2
    Under the child support guidelines a child support payor is responsible to section 7 expenses which include daycare. Each parent is responsible to pay in proportion to their income daycare costs. Where it gets confusing is the custodial parent is required to factor in any income tax deduction they receive for daycare costs so...
    If you paid $6000/year in daycare you would receive a deduction off your income for this amount (for example $6000X0.15=$900). That would mean that your actual daycare costs were $5100, of which the ex would then pay his share, in your case 65% or $3315. BTW he is required to provide you with proof of income/tax receipt/notice of assessment once per year upon a written request. As well, if your child is in a summer camp so you can go to work, it definitely counts as a daycare expense and he should be contributing to it. If things go to court as far as I'm aware judges don't generally order a repayment if he has overpaid, they may credit him for it and reduce future payments though. By all means provide him with your income tax statements, as you said, you have nothing to hide. Make a written request to his lawyer for the ex's income tax, you are entitled to them as this information is necessary to ensure he is paying the proper table amount from the child support guidelines. Double check your agreement, was the 65% based on your incomes at the time or is to pay that no matter how your incomes fluctuate?

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    • #3
      Where does the 15% come from? Is that based on the assumption that I am in the lowest tax bracket meaning that it would be a different percentage if I was in a higher bracket?

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      • #4
        I'm soooo not a tax lawyer or accountant! The 15% was just used as an example. I'm pretty sure since daycare is looked at as an income deduction (much like an RSP) the calculation goes the same way. It is not considered a non-refundable tax credit which is always calculated at the lowerst tax rate. So yes, to answer your question I believe that you would use your highest marginal rate to make this calculation.

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        • #5
          I believe the 15% comes from the fact that child care is a deductable expense on your income taxes. These kinds of expenses are totalled and you get 15% of that total as a credit.

          It's top of mind, because I'm working on my taxes this week

          If the adjustment for taxation is not made, would both parties simply claim their equivalent share? In ScaryCheri's case, for example, could you not adjust for taxes, and then have SC claim 35% of the total expenses on her taxes and her Ex claim 65% on his?

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          • #6
            Found this link - has some quick information about child care deductions and how they are calculated. Hope this helps!!!
            TaxTips.ca - Child Care Costs

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            • #7
              oh and what about the fitness credit of $500, how does that come into play?

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              • #8
                thank you so very much for the info. i feel alot better now that i understand all of this.

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                • #9
                  The fitness tax credit is a non refundable tax credit and as such is calculated at the lowest federal rate which currently is 15%. The concept for payment of extracurricular expenses follows the same concept as daycare though. The parents take into consideration any deductions/subsidies/tax credits available, deduct this portion and then calculate how much they owe respectively.

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                  • #10
                    No problem! That's what this forum is all about!

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                    • #11
                      I do know that only the custodial parent is allowed to claim child care expenses. Trust me, if my ex could claim his percentage then he would!! I think it is under the premise that he technically doesn't have a dependent living with him. I was also told by an accountant that in the case of joint custody the parent making the least amount of money is the only parent able to claim child care expenses.

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                      • #12
                        Reviving an older thread here with a question.

                        My ex is unemployed and thus makes less than the basic personal amount of taxable income (her social assistance apparently doesn't count). In that situation, it would seem from the following table that her marginal tax rate is zero.

                        http://www.blackmont.com/stanwong/fi...ate%20Card.pdf

                        If that is the case, then would child care expenses just be split as-is because there is no tax benefit to the ex for claiming it? Expenses being looked at are from 2007.

                        I'm weak on tax know-how here, so I'm hoping someone smarter than I can help me sort that out lol

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