Child Support Income Determinations – Virginia Divorce

Child Support Income Determinations – Virginia Divorce

For purposes of calculating Child Support in a Virginia divorce, gross income is what is used (not net, not AGI, nor anything else). The term “gross income” is very broadly interpreted. It includes, but is not limited to:

Salaries
Wages
Commissions
Royalties
Bonuses
Dividends
Severance Pay
Pensions
Interest
Trust Income
Annuities
Capital Gains
Social Security Benefits (can be complicated)
Workers Compensation Benefits
Unemployment Insurance Benefits
Disability Insurance Benefits (can be complicated)
Veterans Benefits
Spousal Support received
Rental Income
Gifts
Prizes
Awards

Gross income does NOT include:

Benefits from most Public Assistance programs
SSI benefits
Child Support received
Income received by payor for secondary employment where that income is being obtained specifically to discharge a child support arrearage established by a court or administrative order and the payor is actually paying that arrearage.

What Your Divorce Lawyers Do Not Always Tell You: Alimony Requires Estimated Tax Payments

What Your Divorce Lawyers Do Not Always Tell You:  Alimony Requires Estimated Tax Payments

The IRS Monitors Divorced Individuals’ Payments of Estimated Taxes.

The IRS rules are straightforward for divorced individuals who receive child support or alimony payments. Most recipients (women, predominantly) understand how these rules work. When Form 1040 time rolls around, they aren’t taxed on child support payments, provided their divorce decree specifically distinguishes these payments from alimony.

Tax Effects of Spousal Support (Alimony)

Tax Effects of Spousal Support (Alimony)

ALIMONY IS TAX DEDUCTIBLE BY THE PAYER AND IS CONSIDERED TAXABLE INCOME TO THE RECIPIENT. Paying spousal support (aka alimony) is one of the best tax deals around for the payer.  According to Section 71 of the Internal Revenue Code (“IRC”) (26 U.S.C ¶71), ex-spouses who pay alimony are able to deduct those payments – dollar for dollar – from their adjusted gross income.

How Does Spousal Support Work in Virginia?

How Does Spousal Support Work in Virginia?

Alimony is a creature of both State and Federal Law: Spousal support, also known as alimony, is governed by a combination of state and Federal law. In Virginia, the state law sets forth the criteria (the full statutory list can be found below, in this article) that judges must consider when determining whether or not to award spousal support in a particular case (§20.107.1 Virginia Code). The Federal Law governs the tax aspects of spousal support -- which are many.

IRS Tough When Child Support Upon Divorce Disguised as Alimony – Child Contingency Rule Steadfast

IRS Tough When Child Support Upon Divorce Disguised as Alimony – Child Contingency Rule Steadfast

The US Tax Court, in the recent case of Johnson v. Commissioner, T.C. Memo 2014-67 (April 14, 2014) http://www.ustaxcourt.gov/InOpHistoric/johnsonmemo.buch.TCM.WPD.pdf, has cleared up some misunderstandings regarding the IRS’s Child Contingency Rule. The Child Contingency Rule refers to the IRS’s ability to go back in time and re-coop the tax benefits previously awarded a payer of alimony.

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