You have no idea how this is going to play out. How will life change because your financial resources won’t be what they once were? After support is paid, will you have enough? Here are the First 5s you need to know about child support.
- Child support in Michigan is set by a state formula. The formula takes the following into account:
- Incomes of both parents. This includes all income from employment, dividends, commissions, side-jobs, and bonuses, etc. If you are collaborating or mediating, bring copies of last year’s W2s, and three recent check stubs to your sessions. (If you own a business, bring the last three years of personal and business tax returns with schedules. If you are litigating, the Friend of the Court (“FOC”) will send a form to your employer asking it to verify your income.
- Parenting Plan. Kids need to be fed, clothed, transported and housed. The formula accounts for each parent’s time with the children since more time equals more expense.
- Annual Child care costs. If applicable, costs for work-related child care are included as an expense for each parent who pays for child care.
- Health insurance premiums. The parent who has health insurance benefits, usually through employment, typically pays an additional amount to cover the family. The formula accounts for only the additional amount paid for the family so the expense for the employed parent is subtracted from the total cost before it goes into the formula. You can get this information from your employer or human resources department.
- Tax Filing Status. The formula accounts for differing tax treatment based on filing jointly, as a single person, or as a married person filing separately. On a temporary basis, i.e., until your divorce is final, if you anticipate filing jointly in the current year, it makes sense to run the formula as filing jointly. To plan for post-divorce support, a second formula should be run based on filing as a single person or head of household.
- Dependents and Child Tax Credits. The landscape changed in 2018. Claiming children as dependents no longer results in a tax deduction. But the good news is, tax credits are better than tax deductions. Deductions are subtracted from your taxable income, but credits are deducted from what you actually owe the IRS. Each dependent that qualifies for the child tax credit will reduce your taxes by $2,000 and those that don’t can reduce your taxes by $500 each. The formula accounts for which parent is claiming the children as dependents. Parents can agree that each parent will claim one child or can agree that one parent claims all children. If parents can’t agree, the right to claim a child as a dependent goes to the parent with whom the child lived most during the year. (The child must have lived with that parent for more than half the year and that parent must have provided more than half the support for the child).
2. You can agree to something other than the formula figure. With good reason. Like a lot of issues in divorce, the cookie-cutter approach is mainly for those parents who are incapable of reaching their own agreements. You can agree to a different amount of child support if the formula figure would be “unjust or inappropriate.” Sometimes parents agree that the payor of support will pay, for example, private school tuition, for the child(ren) and less in child support. Sometimes parents agree that the recipient of support will cover those costs and support will be set at a higher rate. There are other reasons which might meet the required justification. The goal is to ensure that each parent has sufficient resources for the children to be adequately provided for in each home. Don’t lose sight of that goal.
3. You can agree on the date for support to start. Many parents during the early days of considering divorce and separating, agree to continue sharing incomes and paying for all expenses as they have in the past. When you each begin to retain your own earnings, child support should begin. If parents can’t agree and a judge has to decide, the date the motion is filed with the court seeking support is the earliest date support can start.
4. Support doesn’t have to be paid through the Friend of the Court. You can agree to direct payments to the recipient parent. It’s often wise to set up an account solely for the purpose of auto-receiving child support payments and transferring them to the recipient parent’s operating account.
5. Child support is paid to…well, support a child! But be aware that the parent receiving support is not required to account for how each support dollar is spent and the paying parent doesn’t have the right to an accounting of each dollar paid. That can be hard news for the parent who pays. But support is not intended to only cover direct expenses of the child, e.g., clothes, school lunches and instruments. So by definition, support is going to also have the effect of assisting, to some degree, the parent paying expenses for housing, food and transportation. But most importantly, it supports the child and that’s what counts.
A final note: while the Michigan formula is available online, it differs to varying degrees to the official software which lawyers and the Friend of the Court uses. Further, if you run it without the input and buy-in of the other parent, you may create resistance or a battle which could have easily been side-stepped in mediation or a collaborative session. If you want assistance, don’t hesitate to contact us.
Wishing you wisdom,