2019 February BLS Update

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Each quarter during the year the Bureau of Labor Statistics releases updated average wage information. The Bradley Kansas Child Support Calculator uses this updated wage information to calculate the interstate pay differential (IPD). The IPD is used to offset the cost of living difference between where a parent reside and Kansas wage equivalence. In effect this equalizes a wage paid in a state other than Kansas with Kansas average wages.

An example of this might be where one parent lives in Kansas who has a monthly income of $2000 and the other parent living in New York state who has a monthly income of $4000. The cost of living in New York state is vastly different than the cost of living in Kansas. Using the latest data released on Feb 20th, 2019 (for 3rd Quarter 2018) the average weekly wage in Kansas is $867. Where the average weekly wage in New York is $1272.

Per the Kansas Child Support Guidelines section III.B.9 (also Appendix IV), these values are used to compute an adjustment in the wages for the parent living in New York. The guidelines state:

To compute the Interstate Pay Differential, develop a value by dividing the average weekly wage in Kansas (KS) by the weekly wage of the new state.

This value is then taken times the wage of the parent living in the new state. So in our example for the parent living in New York the formula is:
(KS avg wage) / (NY avg wage) * (Income of Parent living in NY) = KS equivalent wages
(867)         /     (1272)      *     (4000)   =    $2726

$2726 is the Kansas equivalent wages for the parent residing in New York.

The Bradley Kansas Child Support Calculator has been updated for the latest BLS data update that was released on Feb 20th, 2019. The Bradley Program is updated each time the new data is released, typically within days of that release.

Posted in Child Support, Child Support Guidelines, Uncategorized

ALIMONY IN 2019 UNDER THE TAX CUTS AND JOBS ACT

One of the elements in the calculation of Kansas Child Support is Spousal Maintenance (or, as known to the IRS, “Alimony”).

While many think the Tax Cuts and Jobs Act (TCJA) abolished Alimony, that’s not true. The TCJA only abolished the deductibility (and taxability to the recipient) of alimony paid pursuant to a 2019 or later “Divorce Instrument” – a court order, divorce decree, settlement agreement or other document creating the alimony obligation.

Sums paid pursuant to a pre-2019 instrument remain deductible (and taxable to the recipient) even if paid during 2019 or later. Regardless of when paid, the payments must be “qualified” (just as before the TCJA was enacted) as follows:

  1. Payments must be made by cash or by check.
  2. Payments must be made in accordance with a divorce document, such as a marital settlement agreement, separation agreement, court order, or divorce judgment. Payments made under to a temporary support order also qualify. The document must state the amount to be paid and describe it as alimony, spousal support, or spousal maintenance.
  3. Payments must not be characterized as child support or a part of a property settlement.
  4. Payments must end at the recipient’s death.
  5. The parties must live apart.
  6. If the parties file a joint income tax return, alimony payments are not deductible.
  7. Front-loading” is prohibited — the advance payment of alimony that’s due later makes those payments non-deductible. Excessive payments are subject to recapture or being taxed to the payor in the third post-separation year.

Even though the taxation of the alimony payments may change (and thereby affect the calculation of the Income Tax Considerations adjustment of the Child Support Guidelines), the alimony element of a Kansas Child Support calculation is not changed.

Brad Short and Randy Spivey

Posted in Child Support, Family Law, Taxes | Leave a comment

KS Tax Adjustment and The EPT Adjustment

We had a question recently concerning the Kansas Tax Adjustment (Line E.3 of  the worksheet) in regards to Equal Parenting Time (EPT). The question was:

“How does the ‘Residence With’ setting impact the Tax Adjustment in an EPT situation?”

The ‘Residence With’ setting (RW) designates the “custodial parent” who receives the Child Tax Credit (CTC) of $2,000.00

The Tax Deduction To (TDT) setting can be used to shift the tax benefit of the dependency exemption (Kansas), and the CTC to the other parent.

In non-EPT scenarios, the child support is payable to the custodial parent. The tax benefit received by the custodial parent is allocated between the parents on the basis of their income percentages. If the income percentage share of the custodial parent is a greater amount than the tax benefit actually received by the custodial parent, the difference is subtracted from the child support to reduce the child support and share the tax benefit with the non-custodial parent.

In EPT scenarios, the parent paying support is the one with the higher obligation on Line F3, not necessarily the custodial parent. If the income percentage share of the custodial parent is a greater amount than the tax benefit actually received by the custodial parent, the difference is subtracted from the child support to reduce the child support and share the tax benefit with the non-custodial parent.

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CHILD CARE TAX CREDIT – SHARED RESIDENCY OR EPT

We recently received an inquiry from a subscriber asking why the program doesn’t split the Child Care Tax Credit between the parents in proportion to their contributions to the expense.  Specifically, she asked “Why doesn’t the software the daycare tax credit to both parents in a shared residency calculation?” Upon inquiry, we learned the factual scenario involved a single child being shared under an “Equal Parenting Time” (EPT) agreement.

As previously discussed, the IRS limits the Child Care Tax Credit to the custodial parent of a child under the age of 13, and has no provision for “splitting” the credit, even though both parents pay a portion of the child care expense. Thus, designating the mother as the “resides with” (custodial) parent of the child means only Mom gets the Child Care Tax Credit.

The Child Support Worksheet prepared by the program does, however, in Section F. allocate the net difference between the parents’ EPT support obligations (including the contribution of each parent to the child care expenses) between the parents.

The “Resides With” setting thus takes on added significance (since it indicates the child’s physical custodian), even in Equal Parenting Time situations when you might think the “Resides With” setting would be irrelevant since each parent has equal physical custody.

Just be sure to designate the “Resides With” parent as the one whose daycare expenses should be reduced by the Federal Child Care Tax Credit on page 2 of the Child Support Worksheet.

Remember, if the F1 (Help) key doesn’t provide the answer to your question, let us know!

We always welcome inquiries from our subscribers

Brad and Randy

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Kansas Tax Adjustments: Dependent Exemptions and the CTC (Child Tax Credit) (REVISED)

Tax Return

Since January 1st, 2018, the most frequent question we get on the tech support line has to do with tax adjustments. The TCJA (Tax Cut and Jobs Act) of 2018 has created quite a bit of confusion on how the Kansas Child Support Calculator should create the suggested tax adjustment value.

We’ve written about this previously in several blogs but let’s take a moment to present an updated picture of just how the ITC adjustment suggestion works with respect to two of the four parts of the ITC adjustment calculation.

Remember that your Bradley Child Support Calculator suggests an Income Tax Considerations adjustment based on current (2018) tax law, not 2017 or some earlier taxes.

Dependent Exemptions

The Federal dependent exemption was abolished by the TCJA starting in 2018. However, KS tax law has not been changed for the Kansas dependent exemption, so the current KS tax rules still allow a dependent exemption. The Tax Results created by the Bradley Child Support Calculator report clearly shows the abolished Federal dependent exemption in a green highlighted area:

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The dependent exemption used in the suggested Income Tax Adjustment i2018-07-BlogPic2s the portion circled in RED in the example above. The dependent exemption values are directly linked to the “Tax Deduction To” input on the Children page of the program and allocated to the parent you select.

The CTC (Child Tax Credit)

The TCJA increased the Child Tax Credit to $2000 per child from the $1000 previous value. There were also limits placed on the income applicability of this credit. For a parent who files married filing joint, the credit is fully applicable up to an adjusted gross income of $400,000 (AGI – shown on IRS form 1040 line 38).

From $400,001 to $440,000 there is a phase out of the credit. Above $440,000 the credit is fully phased out and not available to that parent. If the parent files with any other status, then the credit is fully applicable up to $200,000, but from $200,001 to $240,000 the credit is fully phased out. Above $240,000 the credit is not available to that parent.

Keep in mind that the CTC is available only for qualified children.  For CTC purposes, this will usually mean that the child must be related to the taxpayer in one of several ways (son, daughter, grandchild, etc.), must live in the taxpayer’s home more than half the year, must not provide more than half of his or her own support, and be 16 or younger at the end of the tax year.

The Bradley Child Support Calculator program will look at the entry for “Tax Deduction To” on the children page to determine which parent can take the CTC. Normally only the custodial parent can receive this credit, but there is a special rule for divorced parents. Using IRS form 8332, the custodial parent can waive their right to claim the CTC in favor of the non-custodial parent for one or more tax years.

Under the TCJA, which abolished the Personal Exemption for dependents, there is some confusion as to whether IRS Form 8332 is still applicable to the CTC, so even though the Child Support Calculator recognizes that it may be, and you may show the CTC tax deduction as allocated to the non-custodial parent on the Children page (and the Calculator’s suggestion for the ITC value is based on the entries you make in the “Tax Deduction To”), you may wish to consult with your tax advisor as to new revisions to the Form 8332 instructions in deciding whether to make that allocation.

Finally, in addition to the updated CTC there is a new credit introduced by the TCJA – commonly referred to as the “Family Credit.” This $500 credit is available for each dependent who is not a “qualified child” for CTC purposes (age 16 or younger at the end of the tax year), but who are qualified dependents of the parent with whom they reside. This credit added to the CTC, and shown as the “family credit” value on the Income Tax Considerations Adjustment Detail report.

Posted in Child Support, Child Support Guidelines, Family Law, Uncategorized | Leave a comment

New Updates Posted for Kansas Child Support Calculator

New Updates Based on Tax Cuts and Jobs Act (TCJA) Posted for Kansas Child Support Calculator - Bradley Software & Child Support Tools

As discussed in a previous article in January, we’ve been working hard on updating our calculators based on the tax changes caused by the Tax Cuts and Jobs Act (TCJA). Today we’re excited to announce the updates for our Kansas child support calculator have been published and are ready for you to use! The other calculators we offer through Bradley Software and Child Support Tools were unaffected, so none of them require updates at this time.

All of our programs automatically check for updates, so while there’s nothing you need to do before using the updated calculator, we wanted to take this opportunity to walk you through what changed, what didn’t, and why. Continue reading

Posted in Child Support, Child Support Guidelines, Family Law, Taxes, Updates | 1 Comment

2018 Tax Impacts on Child Support & Software Updates

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Some of our subscribers have asked when we will be able to issue updated software reflecting the latest federal tax revisions caused by the Tax Cuts and Jobs Act (TCJA). We are working hard on these updates as we speak, but unfortunately it’s going to take a bit longer. To help explain why, we wanted to take a moment to walk you through some of the anticipated impacts the TCJA will have on child support and what this means for our child support calculators. Continue reading

Posted in Child Support, Child Support Guidelines, Taxes | 1 Comment