CHILD SUPPORT’S JUST A FORMULA, RIGHT? HOW HARD CAN IT BE? (Part 5)

More of the most common issues that I see when calculating child support:

Overtime Income

When a parent’s income includes overtime, parties often argue about whether the overtime income should be included in calculating child support.  One part of the Colorado child support law states that overtime pay is included as income only if the overtime is required by the employer as a condition of employment.  In essence, this means that if the parent can turn down the chance to work the overtime, it’s generally not included in the income figure used for child support. 

However, as I discussed in my Child Support blog #3, another part of the Colorado child support law states that a court may (not shall) deviate from the child support guideline formula if there is consistent overtime not considered in the income figure used to calculate child support.  

In practice, this means that the court cannot mathematically include the voluntary overtime income of a parent when it enters that parent’s income into the child support calculation.  However, once the court has produced the child support figure resulting from the calculation, the court can then adjust that child support figure up or down as it deems fair because a parent has consistent voluntary overtime income.

Income from Second Jobs

If a parent is employed full-time and voluntarily chooses to take a second job, the income from the second job is not included in that parent’s income when calculating child support.  The Colorado legislature doesn’t want to punish a parent who seeks to make more income by working a second job, so it excluded second job income from child support calculations.  Note: if the parent is employed less than full-time at his/her first job, it’s likely that either the second job income will be included, or the parent will be imputed full-time income at the first job.

However, just like voluntary overtime (and as I discussed in my Child Support blog #3), a parent’s income that is more than full-time or is from second jobs can be considered as a reason to deviate from the child support guidelines.  

CHILD SUPPORT’S JUST A FORMULA, RIGHT? HOW HARD CAN IT BE? (Part 4)

In earlier blogs, I’ve discussed some of the challenges that arise when calculating child support, especially when it comes to determining the correct income to use.  Here’s another issue that I often see.

Bonus and Commission Income

Colorado law says that bonuses are income to be included when calculating child support (typically averaged over 12 months and added to the regular monthly income).  In my experience, this is one of the most contentious issues, especially where bonuses are discretionary by the employer. 

A parent who received a bonus one year is often concerned that, if the bonus is included in income, he/she won’t receive a bonus the next year.  The other parent is concerned that if the bonus isn’t included, and the other parent does get future bonuses, the child support figure is unfair because it’s based on income that is too low.  Another concern can arise when the bonus is a one-time annual payment, but the monthly child support payment is based on the bonus being averaged over the year (even though not received monthly).

Under Colorado law, commissions are also income to be included when calculating child support (also usually averaged over 12 months and added to the base monthly income).  The parent with the commission income can be concerned because, although their commissions may vary from month to month, the child support is a set monthly amount.

These are perfect situations for resolution through mediation.  Judges are bound by the law and often don’t have the flexibility to account for these type of circumstances in calculating child support.  In mediation, parents can get much more creative and case-specific. 

I often help parents craft agreements where there is a base monthly child support amount, and then bonuses and/or commissions are shared as received (sometimes through a quarterly settle-up).  That way, a parent isn’t paying child support based on income that he/she doesn’t have, but the other parent is getting the child support benefit when/if that additional income is received.

CHILD SUPPORT’S JUST A FORMULA, RIGHT? HOW HARD CAN IT BE? (Part 2)

As I discussed in my prior blog, the income of the parents is one of the most important factors in determining child support.  Many people assume that it is easy to know what figures to use, but disputes over income are the most common reason for parents to disagree about child support.

First, it’s important to know that when the child support formula is run, it is the monthly gross pre-tax income that is used.  Because it’s too easy for people to manipulate their after-tax/after-deduction income, the child support guidelines were determined based on pre-tax income.

If a parent is a full-time, straight W-2 employee (i.e. just salary or hourly) without overtime, income is usually easy to determine.  However, it rarely happens that both parents fall in this category. 

Below are a couple of frequent issues raised in income determination:

Self-employed parent

When a parent is self-employed, it can be challenging to determine that parent’s income.  The law states that income from self-employment is defined as gross receipts minus ordinary and necessary expenses required to produce the income. 

This sometimes equates to the income shown on a parent’s tax returns from the business, but not always.  For example, accelerated depreciation isn’t allowed to be deducted as an expense. Also, if a parent funds his/her own retirement account from the business and deducts that from taxable income, those retirement contributions are not deducted when calculating income for child support.  This makes sense, since a salaried employee also cannot deduct his/her 401(k) contributions from income when calculating child support. 

Another common situation is when a parent pays personal expenses out of a business – there are certain questions that need to be asked to see if those are appropriate expenses to deduct from gross receipts when calculating income for child support.

Unemployed or Underemployed parent

If a parent is unemployed, the question arises of whether income should be assessed to that parent, and if so, how much? If the parent is voluntarily unemployed, the court can assess an income to that parent for child support calculation (this is called “imputing income”).

Common factors in determining the amount of imputed income include:

  • that parent’s history of earnings
  • the current job market for that parent
  • the parent’s education or training
  • how long the parent has been out of the job market. 

If a parent quit working to avoid paying child support, the court would likely immediately impute that parent his/her most recent income.  If a parent wasn’t working because that was the expectation set during the marriage, that parent will likely be expected to work, but the court is more likely to give that parent time to get his/her skills updated or time to find a job before assessing income.

Another question is the reason for the unemployment – for example, did the parent quit to avoid paying child support, or did the parents  agree during the marriage that a parent should quit working?  These two reasons would lead to two very different court results.

There are situations under Colorado law in which a court would not impute income to an unemployed parent.  For example, if a parent is enrolled in an education program that is intended to result in a degree or certification in a reasonable time and which will result in higher income, the court may not assess income to that parent during his/her schooling. Another example would be a parent caring for a child (of this case) under thirty months of age.   Potential income would also not be assessed against a parent who is physically or mentally incapacitated.

I’ve given just an overview of scenarios described above (self-employed parent or unemployed parent). There are many factors that go into the analysis of both scenarios; each case is fact-specific and it’s rarely cut-and-dried.  Because I’m an attorney very familiar with the law, and because of my many years of mediation experience, I’m able to consider and discuss all of the relevant facts of your case with you and the other party in mediation.

In my next blog, I’ll cover more common issues and complications that arise when trying to determine income for child support purposes.

CHILD SUPPORT’S JUST A FORMULA, RIGHT? HOW HARD CAN IT BE? (Part 1)

As a family law mediator, one of the most common issues that I address in mediation is determining child support.  I can’t even begin to estimate how many people say something like, “I heard child support is a formula, so it must be easy to figure out.”  In some cases, that might even be a true statement.   However, the result of a formula is only as good as the information and numbers that get plugged into the calculation. 

Child Support in Colorado

In Colorado, child support is determined by a formula based on “the income shares model.”  This model assumes that a child should receive the same proportion of income in the form of support from each parent that the child would have received if the parents were together. There’s a chart in the Colorado statutes showing that for each level of combined monthly pre-tax income, what the resulting total base child support should be.  Then, in theory, each parent provides support to the child in his/her percentage of the support amount.

The following is a list of some of the information that typically goes into the formula when calculating child support:

  1. Pre-tax monthly gross income of each parent.
  2. Number of children of this relationship.
  3. Maintenance paid by a parent to a current or former spouse.
  4. Child support paid by a parent for children of other relationships.
  5. Number of children of a parent of other relationships who live with that parent.
  6. Number of overnights in a year received by each parent.
  7. Cost of childcare.
  8. Cost for the children’s portion of medical and dental insurance.
  9. Other specific expenses paid by a parent for the child, including ongoing medical        expenses.

It should come as no surprise that when there are this many factors in calculating child support, there is ample opportunity for parents to disagree about one or more of numbers that goes into the calculation.

In upcoming blogs in this child support series, I’ll address these factors.  My next child support series blog will discuss some of the common issues and disagreements around determining the income figures for each parent.

Did You Know There’s No Such Thing As “Custody” in Colorado?

Many people starting the divorce process in Colorado are unaware that, technically, “custody” doesn’t exist in this state.  In 1999 the law eliminated the term “custody” and replaced it with the phrase “allocation of parental responsibility.”  However, the underlying meaning is very similar. 

Under the allocation of parental responsibilities, there are two major categories that must be addressed in a parenting plan.

Determination of Parenting Time

The first category is determination of parenting time. This refers to the schedule of time that the children spend with each parent (including the regular schedule, the holiday schedule and the vacation schedule).

Allocation of Decision-Making Responsibility

The second category is allocation of decision-making responsibility.  This determines how the major life decisions will be made for the children (generally education, religion, and non-emergency medical, dental and mental health decisions). Under the prior custody law, “joint custody” and “sole custody” meant which parent could make these decisions, but it was all-or-nothing.  If parents had joint custody, they made all of these decisions together.  If one parent had sole custody, that parent made all of these decisions by himself/herself.  There was no in-between.

Under the revised law, responsibility for these types of decisions can be allocated independently of each other.  For example, one parent can have sole decision-making for medical decisions; the other parent can have sole decision-making for education decisions; and they can have joint decision-making responsibility for religious decisions (or any other combination, including joint decision-making responsibility for all decisions).

Why did Colorado change this law?

I was one of the drafters of the 1999 allocation of parental responsibilities law, and I often get asked why the law was changed to eliminate “custody.” 

Based on the experiences of judges and attorneys, parents often got caught up in “winning” or “losing” custody; because custody encompassed all of the decisions, winning or losing this battle had huge repercussions. The other problem was that many times parents agreed on all issues except one (for example, they disagreed only about education). Because of the way the law was previously written, a disagreement about one issue could still cause a parent to lose the ability to participate in all decisions, because the “custody” law was all-or-nothing.

The revised law allows judges and parents to address each decision category individually. This allows parenting plans to be individually tailored for the children, and can prevent a parent being entirely left out of all decisions for the children just because the parents disagree on one issue.

One of the biggest benefits of mediation when there are children is that you create a parenting plan that fits your specific family.  When parents go to court and make the judge decide on parenting issues, court time is usually limited, and often the judge doesn’t have time or isn’t given the amount of information needed for a detailed, family-specific parenting plan.

In mediation, I have a list of questions that I review with you. I use those questions to create an individualized parenting plan for YOUR children.  We can include as much (or as little) detail as you desire.

Beth Henson

Many people are surprised by the number of provisions that should be part of a thorough, comprehensive parenting plan.  Paying attention to detail NOW often prevents conflict and confusion later. I’ve heard back from many parents after mediation who say they’re glad that I encouraged them to talk about and document specific issues up front.  I truly believe that the parents are the best people to decide their children’s post-divorce future; with experienced guidance, an agreed-upon parenting plan is much more likely to happen.