THE CHILD CARE TAX CREDITS

The 2019 Bradley Kansas Child Support Calculator includes the federal child care tax credit (CCTC) worksheet as a part of the program. The CCTC worksheet calculates the federal child care tax credit and automatically applies it to the worksheet based on A) the amount of child care costs paid by the custodial parent for eligible children and B) the parent’s adjusted gross income.

Prior to 2013, Kansas Child Support Guidelines (Administrative order 261) included both the federal CCTC and the Kansas CCTC (which was a percentage of the federal CCTC). In 2012, however, the Kansas Legislature repealed the KS CCTC for tax years beginning in 2013. So, on Jan 1, 2016, Kansas Child Support Guidelines were changed (Administrative order 284 and subsequent Administrative Order 287) to include only the federal CCTC as an element in child support. A reference in those guidelines stated:

“IV.D.5.ed.: Note that the amounts and percentages used in this section may change from time to time due to changes in federal and/or Kansas tax law.  Current tax law should be reviewed for any potential changes.”

This language basically leaves it up to you to figure out if the KS CCTC applies or not in a given year.

A customer called recently to ask us if the KS CCTC could one again be included in our program. In 2017 the KS Legislature re-enacted the KS CCTC for tax years beginning 2018. (See notice at https://www.ksrevenue.org/taxnotices/notice17-07.pdf).

Therefore, in the August 2019 update of the Bradley Kansas Child Support Calculator we have re-implemented the KS CCTC. The 2019 program calculates the KS CCTC at 18.75% of the federal CCTC. A new stipulation of the KS CCTC is that the credit cannot exceed the amount of KS tax due. Since the program already calculates the KS tax due based on the entered AGI; it then compares the two values and uses the smaller amount as the KS CCTC.

We note that in the 2020 proposed update to the KS Child support Guidelines, the KS Child Support Guidelines Committee left in the language that indicates that the user should review current tax law to determine if changes might apply. Given the recent statistics that show a vast number of new filings for child support in Kansas involve one or fewer lawyers, the committee could assist the non-lawyer public by including the currently in-force KS CCTC tax rules in the CCTC provision section of the Guidelines. (Note: The 2020 appendix is being changed to an on-line only text so that it can be updated easily without change to the core of the guidelines, thereby circumventing the lengthy process of a publishing new Administrative Order to update the Guidelines).

Posted in Child Support, Child Support Guidelines, Taxes

THE 2019 PROPOSED CHANGES IN THE KANSAS CHILD SUPPORT GUIDELINES (continued)

In our previous Blog, we addressed most of the changes in the Advisory Committee’s proposed changes to the 2019 Kansas Child Support Guidelines, but we saved a few for the following notes.

As previously mentioned, the 2019 revision proposals fall generally into two broad categories, the first of which was covered in some detail in the previous blog.

  1. General Comments – Changes to Particular Guideline Topics
  2. Omissions – Typos and Errata

We turn now to the last proposal category.

OMISSIONS and CONFLICTS. In Sec.III.B.7.b. Equal Parenting Time Formula, we find the following proviso: “Where the equal parenting time formula is utilized, the parent receiving the equal parenting time child support amount shall be responsible for the payment of the reasonable direct expenses listed in Section II.A.a.1.

This new proviso conflicts with other provisions of Section II.B.7.b, which provide other, additional criteria to be considered beyond which of the parents receives the EPT CS amount, INCLUDING such additional criteria as AN AGREEEMENT OF THE PARENTS.}

IV.C.3(a). Spousal Maintenance Paid (Line C.3.)

Maintenance actually paid under an Agreement or court order entered before 12/31/18 may be deducted online C.3. This remains true without regard to the date of the payment. The TCJA only affected the tax deductibility (and taxation) of the payment. It did not, as some have thought, abolish alimony as an element of divorce proceedings.

And then we have a new proposal which mixes several IRS provisions and the TCJA of 12/23/17 and offers an alternative maintenance deduction of 25%.

  • “For orders entered after Decmber31, 2018, as a result of the 2017 Tax Costs And Jobs Act Tax Reform, the amount of spousal maintenance paid pursuant to a court-approved separation agreement or court order, income for child support purposes by be calculated by taking the total maintenance awarded, increasing it by the federal and state marginal tax rate of the payor, and subtracting the total from payor income while also taking the total maintenance awarded, increasing it by the marginal tax rate of the payee, and adding this amount to the payee’s income

Here, we note that there can be a substantial difference between spousal maintenance paid and total maintenance awarded. As presently worded, the paragraph implies that total maintenance awarded should be counted as child support income even if not paid.

If the parties agree, the spousal maintenance paid may be “increased by an average tax rate of 25% and the amount is entered online C.3.

Payments for arrearages of maintenance shall not be deducted (?!?). {Once again, no explanation is offered}

Neither the genesis nor the rationale of the 25% alternative deduction (which, it appears, could exceed the amount actually paid) is revealed in the new proposal.

Other Irritations

Although it’s all too easy to introduce unintentional and erroneous “corrections” using “auto-correction” and “spell-check” utilities, that’s no excuse for failure to proofread your work, particularly when it comes to statutory materials.

Example: the phrase, “The cost to the parent or parent’s household to provide for health, dental, orthodontic, or optometric insurance coverage for the minor child or children is to be added to the gross child support obligation” – fails to say “added where?” (Guidelines Section IV.D.4.a)

Probably the most confusing issue we saw was the inconsistency in how the sections are numbered, the order of the sections (inconsistent with the revised worksheet) and many incorrect references to the line numbers on the worksheet. It took us quite a while to make sense of it and we had to assume some things that we hope others won’t have to assume in the final draft.

There is still no explanation of how to alternate the tax exemptions. There is discussion about the fact that you can do this, but no listing of methods by which this can be accomplished. Since a child support worksheet is usually only filed/modified once every few years, the worksheet outcome will be in place for years. How does one alternate the deduction each year and use an alternated tax every year?

A section of concise definitions is missing, and many new terms appear in the proposed guidelines without any guidance as to their exact meaning. Neither the table of contents nor the index at the back of the proposal have been updated and often do not refer to the correct sections.

There is no mention of the Kansas Child Care Tax Credit, only the federal credit. See KS Revenue Dept memo – https://www.ksrevenue.org/taxnotices/notice17-07.pdf

Lastly, the examples are very basic. We feel that the examples should at least cover the additional provisions in the proposed guidelines of things like the Ability To Pay, or the Social Security Disability Payments, and how those items are combined with EPT.

You Can Help!

Comments on the proposed revisions are being sought from the practicing Bar, as well as the general public and parents (both residential and non-residential) by means of an on-line-only survey form in which you can indicate your degree of agreement (1 through 5) with each proposed revision, as well as submit your comments.

Take the survey at https://www.surveymonkey.com/r/2019childsupportguidelines, adding comments as you wish; just be sure to submit the survey by 5 PM on August 10, 2019.

Get your own copy of the 111-page proposed Guidelines at http://www.kscourts.org/rules/Rules_Open_for_Public_Comment/CSG.proposed%20changes.2018.2019%20review%20(002).pdf

We hope the foregoing discussion is of some help in keeping the Guidelines (and permutations thereof) a little clearer.  Once again, thanks for you continued interest and support!!

Stay tuned – We’ve got a hunch more “refinements” are on the way!

Brad & Randy

Posted in Child Support Guidelines, Uncategorized

THE 2019 PROPOSED CHANGES IN THE KANSAS CHILD SUPPORT GUIDELINES

Of all the blogs we’ve posted, this (the 67th) may be the most consequential.

Within the 100+ pages of proposed revisions for the 2019 Kansas Child Support Guidelines, are some of the most sweeping revisions seen since the adoption of the original Guidelines (Administrative Order No. 59) on October 1, 1987.

The 2019 revision proposals fall generally into four categories, which will be discussed in two separate blogs:

A. General Comments and Changes to Particular Guideline Topics
B. Omissions, Typos and Errata

GENERAL COMMENTS

In addition to the many edits proposed, several new calculations are required, and the child support schedules (Appendix I) have been modified with changes ranging from a support reduction of $138 per month to an increase of $37 per month per child.

There are also some significant omissions. Which we will cover in a subsequent Blog.

Without reiterating here each edit to Administrative Order 287, it is important that the Guidelines user carefully review the proposed Guidelines and consider the deletions (marked with strike though text) and additions (marked with underlined text), noting that underlining may have been used for emphasis in the prior Guidelines, as well as for additions that are new.

One of the issues we ran into while reviewing the changes was the fact that the organization and numbering of the sections was inconsistent and, in many cases, did not correctly correspond to the revised worksheet. Our recommendation to anyone reviewing these changes is that they pay close attention to the sections and where they actually relate on the worksheet.

The following comments address a few of the areas that seem most significant for the typical user – just a few.

CHANGES TO PARTICULAR GUIDELINES TOPICS

IV. SPECIFIC INSTRUCTIONS FOR THE WORKSHEET

Sec. III.B.7. The phrase “or nearly equal” has been deleted in referring to parents who share the children’s time. It now appears that only “equal” sharing of time is significant.

Sec. IV.B. Reasonable Business Expenses do not include the QBI (Qualified Business Income deduction); the “20%” deduction from self-employed and small business income allowable in determining child support income. Sec. II.E.2

The “Imputed Income” section Sec. II.F. is now renamed “Ability to Earn Income” and details specific circumstances of both parents which the Court must take into consideration, and mandates written findings in support of the imputation of income. Sec II.F.1.

The child support worksheet has been revised in ways which require the user to “show their work” in calculating the requested adjustments and may be confusing.

Sec III.B.7.b – Equal Parenting Time – Where the Equal Parenting Time formula is used, the Parent receiving the EPT differential CS amount shall be responsible for the payment of the reasonable direct expenses listed in Section II.A. However, step 3 of the EPT worksheet requires the selection of which parent is designated to pay the direct expenses. This creates a conundrum – you cannot select which parent pays the direct expenses until you know which one receives the EPT amount but the EPT amount is determined by who pays the direct expenses. If the new stipulation that the lower obligated parent always pays the direct expenses, then why have the decision in step 3 of the EPT worksheet?

{Note, however, that this new proviso also conflicts with other provisions of Section II.B.7.b, which provide other, additional criteria to be considered beyond which parent receives the EPT support differential payment, INCLUDING AN AGREEEMENT OF THE PARENTS.

The changes to Equal Parenting Time still do not fully address the situation where the EPT amount becomes negative. This can occur when the lower obligated parent is not the parent paying the direct expenses. Of all the support contacts we receive this is one the most common questions.

IV.C.3(a). Spousal Maintenance Paid (Line C.3.)

Maintenance actually paid under an Agreement or court order entered before 12/31/18 may be deducted online C.3.

And then, we have the following new proviso, which mixes several IRS provisions and the TCJA of 12/23/18, and then offers an alternative maintenance deduction of 25% (none of which reflect “…orders entered after December 31, 2018, as a result of the 2017 Tax Costs and Jobs Act Tax Reform”.

Neither the genesis nor the rationale for the 25% alternative are explained.

Payments in satisfaction of arrearages of court-ordered maintenance shall not be deducted (?!?). {Once again, no explanation is offered, nor is there a definition of “arrearages.”}

IV.C.4 {See the comments re Section IV.C.3 above, since the provisions in subsections 3 and 4 are identical)

While many think the Tax Cuts and Jobs Act (TCJA) abolished alimony, that’s not true. The TCJA only abolished the deductibility to the payor, (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 tax 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). The guidelines use a mixture of two terms that seemly are in conflict – they use the term “maintenance paid” and the term “maintenance awarded”. In the case of a newly divorcing couple there would not be any maintenance paid yet.

IV.D.4.b Unreimbursed Medical Expenses

Here, the Guidelines proposals revert to the earlier, rejected, “save your receipts” approach to sharing a child’s medical expenses, accompanied by the problematic demands for reimbursement, accountings for insurance coverage, and court hearings. No explanation is given for the course reversal.

IV.E. Child Support Adjustments (Section E)

Section E adjustments apply only when requested by a party, in writing, before the hearing on child support.

IV.E.1. Long-Distance Parenting Time Costs.

Where parents share the costs equally, no adjustment should be allowed. Where the parents do not share the costs equally, the court should divide the costs by 2 in order to allocate ½ of the cost to each parent. (And then give credit to the party actually paying for the transportation.)

IV.E.2.b Parenting Time Adjustment The Parenting Time Adjustment has been increased as a percentage of the child support amount. It now ranges from 10% to 30% of the Nonresidential Parents child support obligation where the NRP time ranges from 35% to 49% of the child’s time.

The other significant change here is that the Parenting Time Adjustment has moved to be in Section D of the worksheet – which is now subject to income proportion. Note also that it is mislabeled as section IV.E.2.b when perhaps it should be labeled section

IV.D.5. IV.E.3. Income Tax Considerations

The Directions for the calculation of the ITC adjustment have, like all other information formerly included in Appendices within the Guidelines, been moved (for ease in updating and modifying) to the Supreme Court’s Website found at KSCourts.org.

IV.F.2 Ability to Pay Calculation.

This new section requires the court to determine the non-residential parent’s ability to meet his or her own basic needs in accordance with current federal poverty guidelines for a household of one. The NRP’s child support income is reduced by the federal poverty amount to arrive at the NRP’s child support obligation using the NRP’s poverty-adjusted child support income. Note that the published poverty guidelines are stated as annual amounts however the line D.1 in the worksheet is a monthly amount. The poverty guidelines amount should be divided by 12 before being subtracted from the line D.1 amount.

While there are instructions for line F.3 and F.5, note that what to do in subsequent lines, line F.4 is completely ignored in the instructions.

IV.F.5 Social Security Disability or Retirement Dependent/Auxiliary Benefit

If the child Receives Social Security Dependent/auxiliary benefits, as a result of the NRP’s disability or retirement, the amount of the child’s benefit is subtracted from the child support on Line F.5.b. If the result is 0 then the new parental child support obligation is $0; otherwise the final subtotal on line F.6.b. is the result of line F.5b minus line F.6 and becomes the new child support amount. NOTE: There is no “Line F.5.b” on the published CS Worksheet on pages 40, 85, 89 of the proposed Guidelines.

If you see something we’ve missed, we welcome your feedback.

Brad & Randy

NEXT: Omissions, Typos and Errata

Posted in Child Support Guidelines, Uncategorized | 1 Comment

2019 Kansas CS Guidelines Update

Federal Regulations require each state to review their state child support guidelines at least every 4 years. In Kansas the Child Support Guidelines Advisory committee has been meeting regularly since last year to review and update the guidelines.

The staff at Bradley Software has attended a number of these meetings to get a head start on understanding the proposed changes, as well as providing input to the committee on issues our customers have raised with the current guidelines.

The committee has now released the proposed revisions to the guidelines for public comment. The Public Comment Period ends in less than 60 days, on August 10th, 2019. We know you are very busy representing your clients so our staff is preparing comments on the proposed changes which we will share with you in upcoming newsletters.

Our goal is to review the proposed guidelines and create a list of the more significant changes. We will send that list along with our views on the changes to you by mid July. You can share your thoughts with us for possible inclusion in our final list, or you can provide your comments directly to the committee via the survey link on the court website.

If you would like to personally review the proposed guidelines (which we strongly recommend), click here for the full text of the Proposed Guidelines

If you have any questions please let us know at inquiries@bradleysoftware.com

… and as always… Thanks for choosing Bradley Software!
Brad and Randy

Posted in Child Support Guidelines

Customize your start page

Have you ever wondered how to customize the entries on your Kansas Child Support calculator when it starts up?

We received an email today asking:
Why does the Court Line 1 always say ‘In the Court of Johnson County’ ? We are in Sedgwick county and it is annoying to have to change it each time we start a new worksheet.

The answer is that you can – and it is quite simple. Click on the following link to download a 1-page instruction sheet on how to customize your start-up entries.

1-Page Customize Your Start Page

Let us know if you need any help!

Posted in Uncategorized

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