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Recent Posts in Dependency Exemptions Category
| December 03, 2010 |
| ELKINS and New FAMILY CODE SECTION 217: How It AFFECTS YOU! |
| Posted By Thurman Arnold, CFLS |
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The most important new rule in decades affecting the experience of California Family Law litigants is set to be unleashed on January 1, 2011.
It promises a radical change in the way that all family court proceedings - whether they be dissolutions, legal separations, annulments, support applications, custody, and modifications of all of the above - are processed and decided by Superior Court judges and commissioners.
This is a result of the Elkins Task Force, which has been quietly operating in the background of the California family law world since roughly August 6, 2007, when the game changing case of Jeffrey Elkins v. Superior Court (2007) 41 Cal.4th 1337 was decided by our California Supreme Court.
Elkins was a landmark decision which held that the Contra Costa County Superior Court could not through its local rules limit parties in marital dissolution actions to introducing evidence in written declaration form that had to be submitted in advance of trial, or prohibiting except in "unusual circumstances" one party from cross-examining the other about the contents of those declarations. Such a rule, intended for the sake of calendar management and judicial economy, not only had the practical if unintended consequence of favoring parties with attorneys who understood how to work with these rules but fundamentally it violated due process by cutting off litigants' abilities to present all relevant, competent evidence on material issues. Judges, as the triers of fact, are not able to assess witness demeanor and credibility without live testimony.
What is earth shattering about this decision in these economic times is that the Contra Costa Superior Court had urged that its policies and local rules were essential for the "expeditious resolution of family law cases." Soon to be former Chief Justice Ronald George rejected this justification:
"We are aware that superior courts face a heavy volume of marital dissolution matters, and the case load is made all the more difficult because a substantial majority of cases are litigated by parties who are not represented by counsel. [Reference omitted]....
In light of the volume of cases faced by trial courts, we understand their efforts to streamline family law procedures. But family law litigants should not be subjected to second-class status or deprived of access to justice. Litigants with other civil claims are entitled to resolve their disputes in the usual adversary trail proceeding governed by the rules of evidence established by statute. It is at least as important that courts employ fair proceedings when the stakes involve a judgment providing for custody in the best interest of a child and governing a parent's future involvement in his or her child's life, dividing all of a family's assets, or determining levels of spousal and child support....
Trial courts certainly require resources adequate to enable them to perform their function. If sufficient resources are lacking in the superior court or have not been allocated to the family courts, courts should not obscure the source of their difficulties by adopting programs that exalt efficiency over fairness, but instead should devote their efforts to allocating or securing the necessary resources."
Justice George ended by directing the California Judicial Council to create a task force (the 'Elkins Task Force) "to study and propose measures to assist trial courts in achieving efficiency and fairness in marital proceedings and to ensure access to justice for litigants, many of whom are self-represented. Such a task force might wish to consider proposals for adoption of new rules of court establishing state wide rules of practice and procedure for fair and expeditious proceedings in family law, from the initiation of an action to postjudgment motions. Special care might be taken to accommodate self-represented litigants. Proposed rules could be written in a manner easy for lay-persons to follow, be economical to comply with, and ensure that a litigant be afforded a satisfactory opportunity to present his or her case to the court." Hence, the Elkins decision is essentially a Jeffersonian ruling that its intended to empower family law litigants and to require counties and courts to adapt.
The Elkins Task force completed its work and has issued lengthy recommendations. The first changes take place on January 1, 2011. Possibly the most important change is embodied in Family Code section 217. It states:
"(a) At a hearing on any order to show cause or notice of motion brought pursuant to this code, absent a stipulation of the parties or a finding of good cause pursuant to subdivision (b), the court shall receive any live, competent testimony that is relevant and within the scope of the hearing and the court may ask questions of the parties.
(b) In appropriate cases, a court may make a finding of good cause to refuse to receive live testimony and shall state its reasons for the finding on the record or in writing. The Judicial Council shall, by January 1, 2012, adopt a statewide rule of court regarding the factors a court shall consider in making a finding of good cause.
(c) A party seeking to present live testimony from witnesses other than the parties shall, prior to the hearing, file and serve a witness list with a brief description of the anticipated testimony.
If the witness list is not served prior to the hearing, the court may, on request, grant a brief continuance and may make appropriate temporary orders pending the continued hearing."
Family Code section 217 will cause a sea-change in day to day family court proceedings across our state, unless family court judicial officers ignore it to the limited extent possible by court rules. It will likely have immense financial and resource consequences upon not only the courts but upon parties to family court proceedings. It will force the state government in coming years to study whole new paradigms for resolving divorce and domestic partnership dissolution outside the adversary template, including those currently practiced in New Zealand and southern Australia.
It will also pressure parties to consider mediation, and collaborative processes which occur outside congested courthouses, much more carefully. The costs of adversary litigation are about to sky-rocket, making mediation even more appealing from a financial perspective (I have written extensively about the emotional and psychological benefits here an elsewhere). There simply is no governmental money available to absorb the coming Elkins Onslaught. For more information about an alternative method for resolving family disputes, please visit us at www.DesertFamilyMediationServices.com.
At the same time, at least in the short run taken together with some of the other revisions that become effective next month, it may encourage more people to litigate more stubbornly and so make mediation seem less attractive than it did before the changes (just the reverse will be true). Some folks will mistakenly assume that this invites the use of court hearings as a live-testimony forum for sharing unresolved complaints relating to their marriage or domestic partnership dissolution with the other party in open court. Instead, judges will sustain objections to such irrelevant material and parties who seek to use Family Court as a platform to air relationship grievances will find themselves alienating the trier of fact in ways that will have adverse consequences to them beyond just the time and expense of the exercise.
The purpose of today's Blog is to introduce you to section 217 and the new changes. I will follow up with more articles in coming weeks. Without a doubt the new rules will make all the information I provide on my websites more relevant and timely for my readers.
December is new legislation month at the Southern California Family Law Blog presented by Family Law Attorney Thurman W. Arnold. My goal is to inform you well, and early on, on any number of topics that will improve your outcome in family law matters and hopefully help you to reach results that are fair for you, your spouse or ex-partner, your children, and your blended and extended families.
T. W. ARNOLD, III, CFLS
(State Bar of California, Board of Legal Specialization) |
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| May 21, 2010 |
| What is HEAD OF HOUSEHOLD status for IRS purposes? |
| Posted By Thurman Arnold |
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Q. What is the effect of claiming "head of household" status in a tax return?
A. Head of household does not apply to joint tax returns. If you are divorced, or if you are married filing separately, you may be entitled to claim HH status. This is also often referred to as HH/MLA (married living apart). There are important tax advantages to filing HH/MLA. It is not an exemption, but a filing status just like filing "married," "married filing separately," and "single."
To qualify you must be separated from your spouse during the last 6 months of the calendar year and have at least one child living with you for more than 50% of the time.
There is an extremely important piece of knowledge here that many attorneys and most family law judges seem to forget or ignore: In situations where each parent has exactly 50% custody of the children, neither can file HH/MLA. 50-50 custody is a common shorthand way to characterize true joint physical custody arrangements. But to be eligible for this filing status, the custody cannot be exactly the same for each parent; if you presently share custody per a equal custody order, you would do well to modify the order (and even alter slightly your actual custodial timeshre). All you need do to avoid this problem is give one parent 50.1% custody and the other 49.9%, particularly in any orders that are drafted and filed with the Court. Squabbling over these percentages is a waste of time and money - it will not hurt you to be the 49.9% parent.
If there is more than one child, then parents can modify the parenting schedule so that each can claim one in order to maximize each party's tax savings and the support dollars.
Your filing status is important to your spousal and child support rights and obligations. Family Code § 4059(a) requires that child support orders be based upon accurate tax filing assumptions, and the support programs (the Dissomaster, Xspouse) similarly require a status to be selected before a support number can be rendered.
For a payor spouse, the child support will be less if the filing status is Single than it will be if the status is HH/MLA, but if you truly file Single the costs paid to the government will likely exceed any perceived savings on child support. This is because a person has more net disposable income after taxes when they are HH/MLA or even MFS than when they are Single. In the same way, the child support may be less for a parent claiming HH/MLA depending upon their income but if they have little income the HH/MLA may have little or relatively little economic value to them.
This is a good example of how Mediation and/or Collaborative Divorce can be used to benefit separating spouses. Money can be saved for both parties where they structure their dissolution to maximize tax benefits and minize tax consequences to each - which nobody typically considers or does in the midst of a hostile, contested divorce. The IRS benefits when couples are at war! In a mediated or collaborative dissolution, neutral tax experts can be consulted and used to design agreements that save the higher earning parent money while increasing the cash available to the supported spouse and for children. Would you not rather give money to your kids than to Uncle Sam?
Thurman W. Arnold III
http://www.ThurmanArnold.com |
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| January 25, 2010 |
| FORM 8332 is required to release DEPENDENCY EXEMPTIONS to Father awarded deduction! |
| Posted By Thurman Arnold |
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The Tax Court rules that noncustodial father is not entitled to claim dependency exemption because custodial-parent M failed to complete Form 8332 releasing exemption and disso judgment, which father attached to return, does not contain substantially same information.
This is a really common situation, where a parent wrongfully claims a child or children on their tax return despite the fact the other parent is entitled to it that year according to the terms of a Judgment or Order. It holds that despite the language of a Judgment, without Form 8332 signed and attached to the return, the IRS will not recognize the deduction.
You still have your claims against the other parent, however, but now you have avoidable attorney fees or must waste your own valuable time enforcing your rights.
Click here to download IRS Form 8332.
TWA
Thomas v. Commissioner [full text] (1/19/10) TCM 2010-11, No. 17922-08 (Vasquez) 2010 WL 174107. When Arizona resident (F) was divorced from M in 6/94, their disso judgment awarded custody of their 3-year-old daughter (C) to M; F was awarded 30 days of visitation in summer, plus reasonable visitation in C’s state of residence. F was also ordered to pay child support of $400/mo through AZ T/CT. Disso judgment further provided that M would claim dependency exemption and child tax credit for tax year 1995 and succeeding odd-numbered years, while F would claim exemption and credit in even-numbered years if he was current in his child-support payments. M was required to execute necessary forms to permit F to claim exemption and credit, but only if F’s child-support payments were not in arrears.
In 2006, F was not delinquent in his child-support payments for C, who lived with M in Ohio. On his 2006 federal income tax return, prepared by CPA, F claimed dependency exemption and child care credit, but CPA subsequently notified him that his return was rejected from electronic filing because someone else claimed dependency exemption. CPA then filed F’s paper return, to which F attached copy of disso judgment, but not IRS Form 8332 exemption release. IRS sent deficiency notice to F, claiming that he was not entitled to claim either dependency exemption or child tax credit. F then petitioned U.S. Tax Court for relief, but TAX COURT RULES FOR IRS. Tax Ct finds that (1) per IRC §152(e), F, as non-custodial parent, was not entitled to claim dependency exemption unless (a) C received more than half of her support from M and F, (b) M and F were divorced, separated, or living separate and apart for last 6 mos. of 2006, (c) C was in custody of either M or F more than half of 2006, and (d) M, as custodial parent, released dependency exemption and F attached Form 8332 release or document conforming to its substance to his return ; (2) F could meet conditions (a), (b), and (c), but not (d); (3) disso judgment did not qualify as conforming document because it lacked Social Security numbers for M and F, M’s signature was not dated, and release of exemption was conditioned on F’s being current with child-support payments; (4) F could not claim dependency exemption; and (5) F’s being unable to claim dependency exemption meant that he was also ineligible to claim child tax credit. Tax Ct concludes that although it is sympathetic to F’s predicament, it is bound by statutes and regs as written.
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