Who Claims the Children as Dependents for Tax Purposes?

About this time of year, separated parents sometimes ask us who can claim the children on their taxes.  Many parents simply agree that the parent that would get the most benefit can claim the children.  Other parents have provisions in their orders directing the parties to claim or not to claim the children on their taxes.  But what about when there is no agreement?

The position the IRS takes is that the person having the children more than half the year can claim the children.  IRS Publication 504.

This means that the custodial parent, or the parent the children live with primarily, can claim the exemption.

So what happens if your orders say that one parent gets to claim the children and the other parent files first, claiming the children?  Realistically, the parent that should have been able to claim the children is going to have a hard time.  They will need to work with the IRS, the other party, and possibly an attorney well-versed in tax law to correct the issue.  The parent could also file an enforcement action or sue for the lost benefit.  The easiest way to avoid the issue?  Speak with the other parent, or make sure you file first.

What is a social study?

When parents can’t agree on who the kids will live with the Court will normally order a social study be conducted. This allows for a non-party, a trained professional, to look at the situation, the concerns of each party, and make a recommendation to the Court.  That recommendation is the social study.

This expert will interview each party as well as watch the interactions between the parties and the kids. They will normally also interview other children or adults that are living in the residences of the parties (should there be any) and do a home visit of each parties home to make sure it is appropriate / safe for the children.

Once the expert is done, they draft the social study. In some jurisdictions, only the attorneys and the judge will see the result.  This is because there have been times when parties have not liked the results of the social study and either share them with the children or even take out their frustrations on the children.

If you are going through a social study, be honest, participate fully, and make sure you comply fully with any requests. Talk with your attorney if you have questions.

A quick overview of the process in Dallas County can be found here.

HEALTH REIMBURSEMENT: DON’T FORGET TO SUBMIT YOUR RECEIPTS!

This is a guest post from Attorney Kevin Segler, also at Holmes, Diggs & Eames.  Thank you, Kevin, for the article!

THE ISSUE:

If the party who incurs an unreimbursed health care expense for a child fails to submit the bill/receipt to the other party for reimbursement within the time period specified in the order, is the other party still required to reimburse for those health care expenses for which they received untimely notice?

HYPOTHETICAL SCENARIO:

Mother and Father have one child and their Order in Suit Affecting the Parent-Child Relationship contains standard language regarding payment of unreimbursed health care expenses. The Order provides that “each party must pay 50 percent of the unreimbursed health care expenses. The party who incurs a health care expense on behalf of a child must submit to the other party all forms, receipts, bills, statements, and explanations of benefits reflecting the uninsured portion of the health care expenses within thirty (30) days after he or she receives them.”

The child is 15 at the time of the order. Five years later, Mother sends Father various bills and receipts for the child’s health care expenses she incurred when the child was 16. Father does not pay. A year after sending Father the bills, Mother files a Motion for Enforcement for a cumulative money judgment based on Father’s nonpayment of his 50% of the unreimbursed health care expenses for the child. Is Father still obligated to pay his 50% even though Mother did not submit the bills and receipts to him within 30 days after she received them?

Short Answer: It seems to be in the discretion of the trial court judge whether Father is obligated to pay.

THE STATUTE:

The Texas Family Code §154.183(c)(1)-(2) states:

(c) As additional child support, the court shall allocate between the parties, according to their circumstances:

  1. The reasonable and necessary health care expenses, including vision and dental expenses, of the child that are not reimbursed by health insurance or are not otherwise covered by the amount of cash medical support ordered under Section 154.182(b)(3); and

  2. Amounts paid by either party as deductibles or copayments in obtaining health care services for the child covered under a health insurance policy.”

Remember, obligations under this section are considered child support and are treated the same as periodic child support payments in that the penalties and limitations periods are the same for enforcement purposes.

THE CASE LAW:

While there are no Texas Supreme Court opinions on this issue, several appellate courts have addressed the topic.

In re A.C.B., 302 S.W.3d 560 (Tex.App.—Amarillo 2009, no pet.)

In 2009, the Amarillo Court of Appeals upheld a trial court ruling that allowed reimbursement for bills despite one party missing the deadline to submit receipts. The order in A.C.B. gave the paying party a ten-day window to provide bills/receipts to the other party. Mother testified that she provided one bill to father within the ten-day window required by the order but there were several bills that were not presented by the deadline.

Even though mother failed to provide the majority of the bills and receipts to father within the ten-day notice period provided in the order, the appellate court held that the trial court did not abuse its discretion in awarding mother 50 percent of unreimbursed medical expenses. The court reasoned that even if mother failed to provide copies of the medical bills within the ten-day deadline established by the modification order, each parent is obligated to support his or her child during the child’s minority and is liable to any other person, including the other parent, who provides necessities for that child.

In re L.L., 341 S.W.3d 22 (Tex.App.—San Antonio 2010, no pet.)

However, one year later the San Antonio Court of Appeals reached an opposite result. When the father in L.L. submitted receipts for his child’s oral surgery two months after the deadline specified in the final order, the appellate court determined the trial court’s denial of father’s request for reimbursement for the surgery was not an abuse of discretion because father failed to provide timely notice of the expense as required by the decree.

Father argued that mother was still responsible for reimbursement because she had a duty to support the children regardless of whether he provided notice pursuant to the decree, relying on In re A.C.B. (discussed above). The L.L. court disagreed, noting that because the trial court chose to enforce the notice requirement contained in the decree, the trial court never acted in an arbitrary manner or failed to follow guiding principles.

Herzfeld v. Herzfeld, 05-10-01298-CV, 2012 WL 6061772 (Tex. App.—Dallas Dec. 6, 2012, no. pet. h.) (NOT REPORTED IN S.W.3d (2012))

The Herzfeld court agreed with the San Antonio Court of Appeals in holding a trial court did not abuse its discretion in denying mother’s request for medical expense reimbursement. While there was evidence from mother that the children saw a psychologist, there was no evidence as to the number of appointments nor was there any definitive testimony regarding the amount owed to the doctor.

Mother testified from memory that both of the children saw a psychologist an average of twice a month, presumably every month from the time of the separation until they turned eighteen. She sought $200 per month pre-divorce and $100 a month post-divorce.

However, there was no evidence Wife timely notified Husband of the payments made and no evidence of the dates on which they were made. Furthermore, the trial court found evidence as to an actual amount was “speculative” because there were no records of visits by date or by child. Given the absence of any other proof to corroborate Wife’s testimony regarding the number of children’s visits, when they occurred, or the cost of each visit, the court upheld the trial court’s decision in concluding the amount was speculative.

CONCLUSION

The classic (and often frustrating) response to many legal questions is “it depends.” It appears that answer also applies here. The one consistency in all three of the above cases is each appellate court’s reluctance to overturn the lower court’s ruling. The trial court’s decision hinges on accepting the “each parent is obligated to support his or her child” argument versus the “strict adherence to the deadline” stance. Just to be on the safe side, one should always submit any health care bills or receipts to the other parent before the deadline passes.

Contracts with Lawyers (2 of 3)

Post two of three deals with flat fee contracts.  These are the simplest contracts.  You pay the lawyer a set amount for a legal matter and that is it – no variance for how successful or not the case turns out.

Flat fee contracts are typically used for situations where the legal work/time/fees needed is easily determined.  Common cases would be a no-contest divorce or a criminal matter.

The problem with flat fee contracts is that most are nonrefundable, and the contract spells out the terms of the representation.  If your case evolves outside of the contract, you lose that money and the representation.  For example, you pay a flat fee for a no-contest divorce, then it becomes contested.  At that point, your lawyer is free to step out because the contract states his representation is only for a no-contest divorce, which no longer applies.  Should a situation like that arise, most lawyers are happy to renegotiate the contract, but do not expect another flat fee!

As always, read the contract closely.  Each contract can vary so pay close attention to the terms.  If you have a question, ask!  Your lawyer would rather have you understand the contract and the process up front so that both of you know what to expect.

Retainer Contracts: Contracts with Lawyers (1 of 3)

Contingency Fee Contracts: Contracts with Lawyers (3 of 3)

How to Change Contractual Alimony

First, make sure the clause you are looking to change is contractual alimony and not spousal support. You can get an idea by looking at my post here.

If it is contractual, read on!

Changing contractual alimony in Texas is not easy. It follows contract law, so typically you need the written agreement of both parties.  You need to look carefully at the terms and conditions of the payments first, and see if there is a built in way to modify or terminate the payments.  If not or the terms do not apply, you are going to need to talk to the ex-spouse.

Why would an ex-spouse agree to change the spousal payments?  Sometimes out of the goodness of their hearts… or perhaps you offer them something of value – some ideas:

  1. More money over a longer period of time so that the payments are smaller;
  2. Less money but in a lump sum payment;
  3. Other property can be used as well; or
  4. An offer to pay off debts incurred jointly or by the other party during the marriage.

We have also seen other consideration given, like the addition/modification of a geographic residency requirement or exchange points.  In the end, the deal is up to the parties, with very few exceptions.

Another method would be to attack it as you would a contract.  This is much more involved, and more difficult.

If you have a question or want advise about a particular situation, email or call – we can help!

Standard Possession Order for 2013

Since we started a new year, I thought the most useful thing to do was post a link to a standard visitation calendar for 2013.

Click OAG’s 2013 SPO Calendar

Of course, the above calendar won’t take into account all of the summer visitation or school holidays – you will have to spend some time doing that.  Here is a good website to help.

Last, click here for a more in-depth discussion of the Texas Standard Possession Order.

Wage Withholding for Contractual Alimony – No longer!

A Texas Court of Appeals held that a wage withholding order cannot be used to collect contractual alimony.  This adds yet another difference between court-ordered spousal maintenance and contractual alimony for both clients and lawyers to know about and discuss.

The full opinion can be found here.

The most interesting part is that this invalidates Texas Family Code §8.101(b) to the extent it authorized wage-withholding for contractual alimony.  The basis?  Unconstitutional under Texas Constitution Article XVI, §28, which states that current wages for personal service are not subject to garnishment, except for the enforcement of court-ordered child support or spousal maintenance!

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