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(provided by Kevin Zlock, P.C.)
Out of all the domestic issues that can arise, payment or receipt of child and/or spousal support is one of the most common. Both types of support are governed by the Pennsylvania Support Guidelines which establish a rubric for calculating the amount of the obligation. While the guidelines are fairly straightforward, determining the payor's support obligation can be challenging, depending on the particular circumstances. Below are some of the issues that can arise:
1. W-2 vs. Self-Employed
When both parties are W-2 employees, determining both parties' incomes can be as simple as transferring the data from the right box on the W-2 form or looking at the YTD figure on the paystub and annualizing that over the course of the calendar year. When one or both of the parties are self-employed, however, determining income becomes a much more complicated task. While self-employed parties do have documentation indicating their income, such as a Schedule C from their income tax returns, this documentation does not necessarily paint an accurate picture of what their true income is.
For example, certain deductions may be exaggerated in amount: the $6,000 car expense deduction may include $3,000 worth of personal car use, the $5,000 cell phone deduction may include $3,500 worth of personal cell phone use, the officer compensation/employee wages may include the compensation of the self-employed party, etc. Without adding back appropriate deductions, a party's Schedule C "income" may reflect only half of that party's actual income.
Another example is when one party runs cash-based business, such as food vending or lawn cutting. While the hope is that the party will claim all of the cash received, it may be the case that the Schedule C reflects only a portion of the gross receipts. If that is the case, it may be necessary to analyze the party's bank statements to determine the source of the various deposits in order to locate additional income or analyze the party's expenses to see if the amount of gross receipts correlates properly to the amount of supplies purchased/expenses incurred. Otherwise, the party's income may be significantly underestimated.
2. Tax Filing Status
Determining who claims the exemptions for the child/children is a common issue, because the tax benefits can be substantial and can impact the amount of the child support obligation. Claiming the exemptions does not only mean the potential to get a tax refund at the end of the year, but it also means a greater net monthly income and, consequently, a greater amount of income available for support. Accordingly, it may benefit both parties if the income superior party claims at least one of the exemptions, if not all of the exemptions. The income superior spouse will get more take-home pay, and the income inferior spouse will get more in child support and/or spousal support.
3. Earning Capacity
There is a common misconception that the guidelines only consider what a party actually earns. Accordingly, the obligor may threaten the obligee with quitting his/her job so as to avoid having to pay any support at all, or alternatively, the obligee may threaten the obligor with quitting his/her job so as to receive more support. Unfortunately, neither the obligor nor the obligee has such a simple option. The guidelines also consider a party's earning potential, which is referred to as the party's "earning capacity." For instance, a party works as a Human Relations Manager and earns $95,000 gross annually, and the Support Order is based on this salary. The party subsequently decides to quit and obtain employment as a server in a restaurant earning $30,000 gross annually. If the party files a Petition to Modify Support, it is almost certain that the Petition will be denied, because the party voluntarily reduced his/her salary and could be making $95,000 per year instead.
This scenario should be distinguished from that in which the party is laid off. If the party's employer terminates his/her employment without cause and the party tries to obtain similar employment but is unable to do so through no fault of his/her own, then the party's earning capacity will not be assessed at $95,000 gross annually. Rather, the party's earning capacity will be the amount at which he/she can obtain employment given the current market demands and conditions. The key in this instance is to ensure that the party did, in fact, make extensive efforts to obtain employment.
4. Primary Custody, 50/50 Custody or Substantial Partial Custody
When child support is at issue, the guidelines' underlying assumption is that the plaintiff has primary custody and the defendant has custody less than 146 of the overnights in a year (less than 40% of the overnights in a year). If the facts of the case deviate from this assumption, the obligation will reflect that change, often saving the defendant hundreds of dollars per month. Consider this hypothetical, plaintiff earns $50,000 gross annually; defendant earns $75,000 gross annually; and the parties have 2 children. Based on plaintiff having primary custody, defendant's child support obligation would be approximately $1,009.00 per month. If defendant has substantial partial custody, for example 160 nights, the child support obligation would reduce to approximately $762.00 per month. If the parties share custody equally, defendant's support obligation would be only $525.00 per month. As this example illustrates, it is important to ensure that the guidelines calculation takes into account the custody arrangement the parties have. If there is no Custody Order in place, the parties should keep track of the overnights to ensure the calculation reflects the custody arrangement accurately.
The above discussion shows that calculating support is not always a simple task, even though the Pennsylvania Support Guidelines lay the ground rules for doing so. In order to make sure you are receiving/paying the proper amount of support, it is often advisable to have someone review your particular circumstances, even if you ultimately choose to proceed on your own.
Information provided by:
Kevin Zlock, P.C.
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