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.

New Alcohol Testing Tool – Soberlink

First, I found out about this from another attorney, not the manufacturer, so this is no advertisement.  Nor is it meant to be – I have no experience with this, I just looked it up and Soberlink seems like a useful tool.

Check it out for yourself, the website is http://www.soberlink.net/

You can have random alcohol testing, or scheduled.  There will be a monthly fee, and a deposit for the equipment, which may keep this out of the hands of everyone, but I think the other upsides are great:

- takes note of location through GPS technology

- take a photo of the person giving the breath test

- sends this to email accounts of attorney’s and/or the parties

- pocket-sized

For those concerned about alcohol abuse, or accused of addiction, this is a useful remedy.

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.

Attorney’s Fees and Bankruptcy

What happens if one spouse, Husband, is ordered to pay the attorney’s fees of the other spouse, Wife, the Wife pays the attorney’s fees, requests reimbursement, then Husband files for bankruptcy?  Is the Wife out of luck?

This situation came up in In re: Jeffrey Todd Van Dermark, a 2008 case from the Bankruptcy Court in the Northern District of Texas.  Quick answer – the Husband had to pay the fees in full.  But read on, there’s more to it.

Quick Facts:

  • Husband and Wife divorced in Georgia, in 2006.
  • Wife had a contract with her attorneys and was required to pay them upon receipt of the invoice.
  • In the Final Judgment and Decree of Divorce, Husband was ordered to pay $25,000.00 in attorney’s fees to Wife’s attorney.
  • Wife ended up paying the firm the $25,000.00, and turned to Husband to be repaid.
  • Husband filed for bankruptcy the next day, and tried to discharge the $25,000.00 debt.

Question for the Court

The question the Court was asked to answer was this – “Was the $25,000.00 a domestic support obligation under the bankruptcy code since Wife paid it and now demanded it from Husband, so protected as a priority claim?  Or was it not a domestic support obligation because the Husband was supposed to make the payment to Wife’s attorneys?”

The reason it matters is that if it was found to be a domestic support obligation, Husband would have to pay that $25,000.00 first (that claim has priority) and in full.  If not, the $25,000.00 claim would be reduced or fully discharged and Wife would be left out in the cold, having shelled out $25,000.00.

The argument provided by counsel was whether or not this claim was owed to Wife’s attorneys or to Wife under the domestic support obligation statute in the Bankruptcy code, and focused on Section 101(14A)(A) of the Bankruptcy Code, which states for a claim to be a domestic support obligation, it must be:

“a debt that accrues before, on, or after the date of the order for relief in a case under this title, including interest that accrues on that debt, as provided under applicable non bankruptcy law notwithstanding any other provision of this title  that is -

(A) owed to or recoverable by -

(i) a spouse, former spouse, or child of the debtor or such child’s parent, legal guardian or responsible relative; or…”

The Court looked first to the bankruptcy code’s definition of ‘claim,’ and found that it is a ‘right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent  matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured,” and that the definition was intentionally broad.  11 U.S.C. 101(5)(A); See In re Egleston, 448 F.3d 803, 812 (5th Cir. 2006).

The Court also turned to Georgia’s statutory definitions, since the Final Judgment and Decree of Divorce was out of Georgia, and found that it supported this claim as being owed to Wife, not just her attorney, per the language of the Decree of Divorce and under Georgia law.

Since that was the only argument asserted, and the Court found that the claim was, in fact, owed to and recoverable by Wife, the claim was a domestic support obligation.

Further Thoughts

One thing not argued, and which would have been interesting, is whether the Court believed it to fit the second requirement of a domestic support obligation, that the debt is

“(B) in the nature of alimony, maintenance, or support… of such spouse, former spouse, or child of the debtor or such child’s parent, without regard to whether such debt is expressly so designated;…”

- 11 U.S.C. 101(14A)(B)

I think the claim would have been denied that special status at that point.  The claim just does not fit the second part of the definition for a domestic support obligation.  Unfortunately, we will not know until a similar fact set occurs, the argument made, and an opinion issued.

Related Article:

Child Support and Bankruptcy

List of School Districts in Texas

Sometimes you need to know a school districts holidays, either for possession reasons or you are just curious.  If you ever wanted a full list of school districts, which you can then interact with and get to the school websites, click HERE.

We do this sometimes in planning possession schedules or trying to help a client see options when it comes to visitation, especially if they choose to exercise possession once a weekend under the +100 miles provisions of the Texas Family Code.

Hope this helps.

Pro Se Divorce Forms – Approved, but with Caution

The Texas Supreme Court recently approved a set of pro se divorce forms, with some pretty extensive disclaimers.  Specifically among those disclaimers is that these are only to be used for limited property, no children, no contest divorces.  Note that you should always sit down with someone that knows the process (a lawyer) and discuss your options.  Even the form’s disclaimer says that you should hire a lawyer.   In my experience, NOT hiring a lawyer tends to end up much more expensive when you have to get the order modified or corrected in the future.

What Would My Texas Child Support Be?

Ever wonder how much you would pay in child support in Texas?  The Texas Office of the Attorney General has on online child support calculator that gets pretty close to figuring out what your child support obligation would be in Texas.  The actual number may vary, but this will give you a good idea -

LINK TO TEXAS CHILD SUPPORT CALCULATOR

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