Can I go to Jail for not paying Child Support?

Under M.G.L. c. 215 s 34, a Judge can incarcerate a Defendant who has failed to pay under a Court Order that was clear and unambiguous, so long as the Defendant had the ability to pay. Many Contempt Complaints in the past few years for issues of non-payment have been due to the down-turn in the economy. The key issue in many of those cases is whether or not the Defendant had the ability to pay.

It can be difficult, though, for the Court to distinguish between a party who is a victim of circumstance and truly unable to pay, and the lazy or vindictive ex who is just not trying to pay their fair share. In 2009, Judges in Massachusetts incarcerated 848 defendants for Contempt. In 2010, the number dropped to 622. That drop may be due to a perception that the economy is affecting more Defendants, but it's difficult to know for sure.

Regardless, you don't want to be among those counted in 2011 (nor do we want any of our clients to add to that number). In these cases the credibility of the Defendant is very important as is any evidence they can present to show a legitimate reason that they were unable to pay. In addition, if the Order is still in effect, the Defendant should likely file a Complaint for Modification to ask the Court to make a change so they will not continue to be in Contempt going forward. If you are not sure about how to proceed on this type of matter, we strongly recommend consulting with an attorney before it's too late.

Is Alimony Always Tax Deductible?

Generally, alimony is tax deductible to the payor and taxable income to the recipient. The purpose of this tax treatment is to treat the alimony as a transfer of income from payor to recipient. However, there are requirements for alimony payments to qualify for this favorable tax treatment.

The IRS defines alimony as: "a payment to or for a spouse or former spouse under a divorce or separation instrument. It does not include voluntary payments that are not made under a divorce or separation instrument."

Agreements executed after 1984 have different requirements than agreements executed before 1985. For purposes of this post we are only going to discuss post-1984 agreements:

Under a post-1984 agreement, judgment, or order, alimony is only tax-deductible to the payor if the following requirements are met:

• The parties file separate tax returns; 
• The payments are in cash; 
• The agreement, judgment or decree does not indicate that the payments are not alimony; 
• The spouses are not members of the same household at the time the payments are made. This requirement applies only if the spouses are legally separated under a decree of divorce or separate maintenance (i.e. doesn't apply to temporary orders). You are not treated as members of the same household if one of you is preparing to leave the household and does leave no later than 1 month after the date of the payment; 
• Payments end upon death of the recipient spouse; and 
• The payment is not treated as child support (which includes making the payment contingent on an event relating to your child).

For more information and examples that pass or fail these requirements read IRS Publication 504.

Equitable Division: This isn't Judge Solomon's Court

I was recently directed to two articles involving Husbands, one in Germany, and another in Cambodia, that, as part of their divorce, took their half of their marital homes, literally. Not by selling and getting their share of the equity, and not by buying their Wife out of her share, they literally cut the house in half.

Don't get any ideas if you're getting divorced in Massachusetts, though.

In Massachusetts the Court is directed by M.G.L. c. 208 § 34 to divide the assets of the parties and award support based on numerous factors including the length of the marriage, health of the parties, age of the parties, income of the parties, opportunity for future acquisition of assets and income, and more.

When considering all of these factors, we often discover that an equal division of the assets, i.e. a 50/50 division, is the equitable and fair resolution. However, there are also cases where the totality of the circumstances require an unequal division. You won't find Judge Solomon in a Massachusetts' Court, though you might still find some wisdom.

P.S. Don't think it only happens in other countries. This couple in New York built a wall down the middle of their house.

Thanks to Michael Paonessa for sending us these articles.

Divorce and Taxes: Issue #5. Joint Tax Liability

Issues 1 through 4 all focus on the tax liabilities created post-divorce. But what about tax liability incurred during the marriage?

Issue #5. JOINT TAX LIABILITY: The Court has the power in a divorce case to assign both assets and liabilities, including tax liability incurred during the marriage. If there are joint tax returns filed during the marriage for which taxes are still owed, that liability is owed by both parties to the taxing authorities. The Court may assign that debt to one party by order or agreement, but that doesn't always satisfy the taxing authorities.

Unless you file an innocent spouse application with the IRS (and the IRS makes an innocent spouse determination in your favor), they will still consider a joint debt owed by both parties until satisfied. A probate court order allows you to collect against your former spouse but does not prevent the IRS from collecting against you. Therefore, if there are any assets available for the payment of tax debt at the time of divorce, paying the debt off immediately is recommended.

We also recommend including language in any settlement agreement to deal with the possibility of an audit that assigns debt on a joint return that was previously considered satisfied:

"For the years of the marriage (__________ to __________), if there is a deficiency assessed in connection with any joint federal or state income tax returns heretofore or hereafter filed, or if any other notice is received by either Party relating to any Federal or State tax, interest or penalty claim, the Party notified thereof shall forthwith notify the other Party immediately in writing. Each Party, on account of whose net income a deficiency is assessed, shall pay the amount ultimately determined to be due thereon with respect to his or her net income, together with interest and penalties, and shall pay as well any and all expenses that may be incurred if he or she shall decide to contest the assessment.

In the event that the deficiency is assessed with respect to joint income, each shall pay the deficiencies and expenses in the same proportion as each Party actually received the said gross income for the calendar year in which the deficiencies and expenses are assessed. For purposes of this EXHIBIT “gross income” shall be defined in accordance with the applicable provisions of the Internal Revenue Code of 1986 and in accordance with the applicable provisions of the Massachusetts Child Support Guidelines.

Each Party shall keep the other fully informed of any and all steps taken by him or her with respect to any deficiency assessment. The Party whose actions are responsible for the deficiency, if any, shall in all respects indemnify the other against and hold him or her harmless from any deficiency assessment or tax lien arising out of any joint return heretofore or hereafter filed by the Parties, as well as any damages and expenses whatsoever made in connection therewith including reasonable attorney's fees and costs."

Click here to read Divorce and Taxes: Issue #6. Same Sex Marriages.