Rhode Island Divorce Tips

Alimony Deduction Gone

Authored By:  Christopher Pearsall, RI Divorce Attorney
a.k.a.  " The Rhode Island Divorce Coach ℠ "

Under the Tax Cuts and Jobs Acts, alimony that has not been already been established by a Final Judgment or Final Decree of divorce or a settlement document incidental to a Final Judgment or Final Decree of divorce as of December 31, 2018 is no longer taxable as income to the payee receiving it, nor is it deductible from income by the payor spouse.

Alimony was previously deductible to the payor against their income and includable in income of the recipient payee.  This provided a modicum of fairness between the payor and payee.  The payor didn't have to pay the tax on the alimony monies being paid to the recipient payee because it was money the alimony payor wasn't able to keep.  By the same token the payee was held responsible for the tax on the alimony money being received but it was money the payee did not actually earn.

Why did our legislature change this long-standing deduction in the law? 

The answer?  Tax revenue.  The person paying the alimony in a divorce or separation (called a "Divorce from Bed and Board" in Rhode Island) proceeding was almost invariably the higher earner.  The person receiving the alimony payment was the lower earner.  Generally speaking, the payor of the alimony was then in the higher tax bracket and would end up paying more taxes on his or her income.   The recipient payee of the alimony was in the lower tax bracket and would pay less taxes on his or her income.  By eliminating the deduction, the taxes paid on the alimony will now be paid by the higher tax payer in the higher bracket resulting in more tax revenue to the government.

What could the removal of this deduction mean to your Rhode Island Divorce proceeding?

If you are the payor of alimony either by entering into an agreement with your spouse to pay alimony in divorce or separation settlement or by a judgement of the court that requires you to pay it, it could mean a greater alimony burden for you if the judge does not account for this new tax consequence because you will be responsible for both the out-of-pocket alimony payment as well as the taxes on those alimony monies at the end of the year based on your tax bracket for that year.'

Will the family courts change how it determines alimony based on this change in the tax deduction? 

It's unclear at this point how this will affect the courts legislatively, procedurally or administratively.  The hope expressed by some practitioners is that judges in Rhode Island and throughout the country will take the removal of this long-standing tax deduction into consideration for the payor when it comes to issuing judgments providing for alimony payments.  Since the tax burden can be significant depending upon the tax bracket and the amount of alimony that may be ordered to be paid, one would hope that the trend would be a reduction in the amount of alimony awarded.  By reducing alimony judgment amounts the court might normally have issued prior to the removal of the alimony deduction, a judge could fairly offset the payor's total alimony burden by taking into account this tax consequence which causes the payor to pay more because of the alimony judgement.  Since the spouse receiving the alimony is essentially receiving "tax-free" money and no longer has to pay taxes on the money received because it is no longer includable in income, it would seem more than equitable that the court make such an adjustment to the amount of alimony to account for the added tax detriment to the payor and the added tax benefit being received by the recipient spouse of not having to pay taxes on the alimony received.

It is always best to sit down for an advice session with a competent and experienced family law attorney in the state in which you have your issue before taking any kind of action.

For people within the State of Rhode Island, feel free to call me to set up your comprehensive low-cost flat fee legal advice session. Know what your options are before you act.

Call today and be on your way to getting the answer you need!  (401) 632-6976

By:  Christopher A. Pearsall, Rhode Island Divorce and Family Lawyer

QUESTION: 

How Can I Claim My Child If I Pay Child Support?

ANSWER:

If you're looking for an easy answer that allows you to claim your child for State and Federal Tax purposes, you won't find it because it's usually not that easy if you are the payer of child support.

As a lawyer I focus my practice exclusively in Rhode Island Divorce and Family Law. Many people think they that if they pay child support that they are entitled to claim one or more children in whole, or in part, on their taxes.

Under Rhode Island Family law and probably in many other states the situation is just as John describes it. In the Rhode Island Family Court the spouses of a child can agree who will claim the child as a deduction on state and/or federal taxes. However, the agreement must be formal and must be approved by the family court in order to be proper and binding.

In the alternative, if there has not been an agreement approved by the family court between the parents about which parent will claim which child(ren) on their federal or state taxes as a dependent and/or claim the exemptions for the child(ren) , then one of then a parent may petition the court to award him or her one or more dependency and/or exemption claims for a child or children.

However, in Rhode Island if there is a divorce proceeding that has come before the court there is a presumption that the parent who has primary physical custody (also referred to as “placement parent”) of each minor child is the one who will receive the dependency and exemption deductions for the child or children in their placement. This is set forth in the Administrative Orders of the Rhode Island Family Court.

It should be noted that even if one parent agrees that the noncustodial parent may have the dependency and/or exemption allowances of one or more of the children living with the placement parent, OR if the state court orders that a noncustodial parent may have the dependency and/or exemption allowances for one or more of the children living with the placement parent, this is not all that is required.

Whether a parent may take a dependency deduction and/or the exemption allowances it is federal tax law that determines who may claim a dependency exemption for a child.

Even if a state court order allocates a dependency exemption for a child to a noncustodial parent, the noncustodial parent must comply with the Federal tax law standards and tests in order to qualify to claim an exemption for the child(ren).

To claim an exemption for a child(ren), the noncustodial parent must attach to the noncustodial parent’s return a copy of a release of claim to exemption by the custodial parent.

The release may be on a Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, or a document that conforms to the substance of that form. (See Internal Revenue Service Info Page)

In other words, while it may be nice to bargain with dependency allowances and exemption claims in a divorce or family law proceeding, it is not always as easy to bargain for the deductions for children in the proceeding.

Even if a custodial spouse agrees to give a noncustodial parent the dependency allowances and exemptions for a minor child as part of a settlement and agrees to sign IRS Form 8332, the agreement may be a waste.

Why? Essentially it is because if the noncustodial parent does not meet the Federal IRS Tax Regulations to take dependency allowances and exemptions on his or her taxes, then the deduction may well be lost to both parents or the noncustodial parent may raise a red flag for an audit for taking unallowable dependency deductions and exemptions.

Related articles

RI General Laws § 15-5-12 Domicile and Residence Requirements

Enough of the Bias Already! When Family Court Judges Cross the Line!

Collaborative Lawyers in Rhode Island - The Mistake of Avoiding the New and Different.

FAQ: Why Can't the Rhode Island Family Court Clerk's help me fill out forms?

Atty Chris Pearsall

Authored By:  Christopher Pearsall, RI Divorce Attorney
a.k.a.  " The Rhode Island Divorce Coach ℠ "

Google+ Author Profile

Publisher on Google+

Question: I have a question on my son being claimed on ex-wife’s taxes. My son is going to be 20 in a couple weeks (scary). He has income, summer work and interest from bonds we had to cash for school. I can put the income on my tax return but, can I now claim him on my taxes? I don't want the added income and not the deduction. I supply all finances for my son's school and living expenses. I don't know how the agreement holds in the legal document stating ex-wife can claim this son? Does this end like the support for him ended when we modified the contract (child support) because of his turning 18 years of age?

Response: If you don't know how your marital settlement agreement with your ex-wife holds or states under what conditions your ex-wife can claim your son then you clearly need to get a copy of that document from your family court file. The wording of that document is likely to be the controlling language and probably has the answers you are looking for. Without it, we are just talking about speculation. For instance, typically if you have a marital settlement agreement with your ex-wife that states that she is allowed to claim your child until he can no longer be claimed anymore then you can't claim the deduction. The child support termination time does not relate to your private agreement with your wife about the tax deduction unless your marital settlement agreement somehow ties the two timeframes together. This is something I have seen done only once in the course of my practice. Unless the marital settlement agreement is somehow worded poorly so that you have a legal way to justify claiming your son as a tax deduction without violating that agreement, then you cannot take the deduction. Without the agreement in front of you, you don't have the information you need to make an informed decision and attorneys such as myself don't have the information we need to advise you properly and accurately based upon your correct circumstances.

As I stated, this is just speculation based upon what may be in that agreement so you can understand that the importance the wording the agreement plays here. Typically if I represent a soon to be ex-wife I also make sure that under some circumstances she may need to realize that if your son files his own taxes and claims his own deduction then she is precluded from taking that deduction too, provided new legislation doesn't state otherwise. You should get the Marital Settlement Agreement from your divorce file at the court and then provide the exact language so that you can obtain legal advice from a lawyer or through this forum that does not involve any form of speculation and we are dealing with facts and not guesswork based upon what you may think is in the document. I hope this has been of some help. Feel free to contact me for a paid advice session once you have the document. Best of Luck to you no matter what you choose to do.

On July 11, 2012 a new Rhode Island Supreme Court decision was issued in the case of Sofya M. Zhorkova v. Paul D. Gaudreau, No. 2011-295-Appeal  (RI - July 11, 2012).  It was an interesting case that I took to trial on behalf of the Defendant and the trial court found for the Defendant.  The determination was the the Plaintiff failed to meet the standards necessary to prove all the elements necessary to show that a common law marriage existed.

The Plaintiff appealed the trial court decision of Judge Stephen Capineri essentially arguing that the Plaintiff had, in fact, met her burden of proof that there was a common law marriage between the parties as evidenced by joint tax returns filed is husband and wife by the parties.  These joint tax returns were filed for four (4) of the twelve (12) or so years the parties lived together.  The Plaintiff's attorney argued that the joint tax returns were proof of the vast majority of the standards necessary to prove a common law marriage.

The defendant went to a few attorneys before consulting with me and hiring me as his lawyer.  Before engaging me the Defendant inquired from several well known long-term practitioners.  In short, those practitioners essentially informed the Defendant that since he had filed joint tax returns as husband and wife for various years, that the court would most assuredly find that there was a Common law marriage between him and the Plaintiff.

The advice was, however, short sighted and was incorrect.  The fact is that Rhode island Common Law marriages aren't very common anymore. 

To prove that a marriage exists at Rhode Island common law, the two people must have (1) had the intent that they both be married to one another, (2) that the intention existed at the same time and is not conditional upon any other action, event, or thing, (3) that the parties demonstrated by their words and/or actions their intention to be husband and wife such that their was a uniform and consistent belief among friends, family, and the community that they intended to live as husband and wife, and (4) that there was, in fact, a uniform and consistent belief that existed among friends, family, and the community at large that the parties were, in fact, married.

The Plaintiff's argument on appear focused on the joint tax returns on appeal.  The Plaintiff argued that the filing of joint federal tax returns demonstrated an intention for the two parties to be married, that the intention must have been at the same time because the tax returns were mutual and signed at the same time and therefore they exercised their intention to be husband and wife at the same time.

The Plaintiff further argued that by signing and filing the joint federal tax returns as husband and wife that both parties were outwardly representing to the Federal and the State of Rhode Island Division of Taxation and anyone they provided those tax forms too for loans or financing that they were making an outward and affirmative demonstration to the community, friends and family that they were married.  The Plaintiff also argued that at different times while the parties were living together that they each placed the other on their health insurance policies as a spouse to obtain coverage.

Many practitioners focus on the obvious and make a "quick call" if they give prospective clients legal advice.  In this case, three well-known divorce practitioners advised the Defendant that he had no chance of winning and that the court was certain to declare that he and the Plaintiff were married at common law.

Personally, my philosophy is to give correct and knowledgeable legal advice or not to give any at all.  Thankfully the Defendant did call me and we took a detailed hour for a paid legal advice session to do a full analysis of his situation.  By the time we had completed the call, I was certain that with the right presentation the court would not find there was a common law marriage because the Plaintiff had to prove each and every aspect of her case by clear and convincing evidence.

The attorneys that the Defendant sought counsel from before the Defendant found me would have been subjecting the client's assets to substantial exposure of loss if he had believed them and not kept looking and found me.

Be careful, that a quick review and some fast advice by an attorney who doesn't provide a thorough assessment of your case doesn't lead you in the wrong direction.

When it comes to common law marriages, they are, in fact, rare.  The plaintiff's burden to prove a common law divorce under Rhode Island law is not an easy one.  All it takes is enough doubt in the judge's mind that makes him or her reasonably hesitate in finding for the Plaintiff on every aspect of his or her claim is all that is needed to stop the court from finding that there is a common law marriage.

If there is doubt, the evidence is not as clear and convincing to the court as it needs to be.  Create some reasonable doubt in the Judge's mind and one more common law marriage is defeated making them even less common.

Yes, Rhode Island Common Law divorces aren't so common anymore.

All My Best to You on Your Journey Through The RI Family Court,
Attorney Christopher A. Pearsall - "The Rhode Island Divorce Coach"™