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Child Support

Basics

Child support can be generally defined as a “parent’s legal obligation to contribute to the economic maintenance and education of a child until the age of majority [or] the child’s emancipation before majority.” Black’s Law Dictionary, 10th ed. 2009. In Wisconsin the age of majority is 18 years, or 19 if the child is still in high school.

The court must apply designated “child support standards” when determining the amount of child support to be ordered. There are different standards for different scenarios. The three most important factors are (1) how many children will be subject to a child support order, (2) the amount of placement each parent has with the child, and (3) the payer’s income.

If a parent has fewer than 92 overnights a year with the child, then the “straight percentage” standard would apply. The percentage standards are as follows:

  • 1 child = 17% of the payer’s gross income
  • 2 children = 25% of the payer’s gross income
  • 3 children = 29% of the payer’s gross income
  • 4 children = 31% of the payer’s gross income
  • 5 children+ = 34% of the payer’s gross income

 

If the parents share placement and both parents have more than 92 overnights a year with the child, then the “shared time formula” applies. Under this formula, both parent’s incomes are calculated along with the number of overnights each parent has with the child. The formula is not a “straight percentage” of either parent’s income but rather factors in several mathematical steps to reach a child support amount.

For example, let’s assume Kevin and Andrea have one child together at the time of their divorce. If Kevin receives placement of their child every other weekend (approximately 26 overnights), the straight percentage standard would apply. If Kevin earns $60,000 a year, this would result in an annual child support obligation of $10,200 or $850 per month.

NOTE: Even though the child support is based on gross income (pretax and prepayroll deductions), the amount is paid from his net income (posttax postpayroll deductions).

Now let’s assume that Kevin and Andrea have an equal placement schedule of their child (one parent has 182 overnights and the other parent has 183 overnights a year). In order to determine child support under the “shared time formula,” we now need to consider Andrea’s income. Let’s assume she earns $50,000 a year. Under the shared time formula for child support, Kevin would owe $109.00 per month in child support.

CAUTION: Some parents mistakenly believe that if they have equal placement of their child, there would be no child support obligation. But the law presumes that if there is a discrepancy in the parents’ income, even under an equal placement schedule, there will be a child support obligation under the “shared placement formula.”

There are other child support formulas for other special circumstances such as a serial payer situation in which the obligor of child support already owes a child support payment for a prior child. In addition, the amounted owed for child support is reduced for a low-income payer (who earns 150% of the federal poverty standard or less) and even for a high-income payer (who has an annual income of $84,000 or more).

Child support standards are mandatory under Wisconsin’s child support statute -- but they are not inflexible, and in the rare case, the court can deviate from them, as explained below.

The law requires the court to apply the percentage child support standards unless the court determines that strict application would be unfair to the child or any of the parties.

The factors the court can weigh when determining whether the mandated amount of child support would be unfair to a party or the child include (1) the financial resources of the child, (2) the financial resources of each party, (3) the maintenance (“alimony”) received by a party, (4) the child’s educational needs, (5) the earning capacity of the parents, (6) the physical, emotional, and mental health needs of the child, (7) the cost of child care if the custodial parent works outside of the home or the value of the custodial services if the custodial parent remains in the home, (8) the standard of living the child would have enjoyed if the parents had not divorced (not applicable to paternity actions), (9) extraordinary travel expenses related to a parent’s exercise of his or her placement with the child, and (10) any other factor the court deems relevant.

For example, if Kevin lived in New York City and Andrea lived in Wausau, Wisconsin, and Kevin was required to purchase a plane ticket and hotel accommodations for his placement with their child, those costs could be factored into the amount of child support he has to pay. This could constitute an “extraordinary travel expense” that would make the application of the child support standards unfair to Kevin. In addition, the fact that there is a substantial difference in the cost of living between New York City and Wausau, Wisconsin could also be deemed another “relevant factor” that could warrant a deviation from the child support standards.

CAUTION: It must be stressed that the courts are generally reluctant to deviate from the child support standards. The reason is twofold: First, because the child support standards are statutorily presumed to apply, it takes a great deal of evidence and argument to overcome this presumption. And second, the courts understand that raising a child is expensive and that even child support under the child support standards rarely is enough to cover a fair share of the children’s expenses. Nevertheless, under the right circumstances, the court can find that application of the child support standards is unfair to a party or the child.

CAUTION: If you believe your circumstances would warrant deviation from the child support standards, contact an attorney.

A payer of child support who earns part or all of his or her income based on commission sales presents a challenge for the court. All commission income is subject to child support, but the court cannot accurately predict future commissions. This issue often arises in the context of sales representatives, car salespeople, realtors, servers, hair stylist, and self-employed individuals.

The court has several options in determining the monthly child support amount for commission income. The court could look to the payer’s past tax returns to determine an average income for the person. Or the court could set a minimum “baseline” of income for the person and base the monthly support on that baseline while also ordering a percentage of income above that baseline as child support.

For example, let’s assume Kevin is a car salesperson. In the past three years, he averaged an annual income of $80,000. The court could determine the monthly amount of child support on Kevin earning $80,000 and a percentage (pursuant to the child support standards) on any income Kevin should earn above $80,000 as additional child support. If Kevin had fewer than 92 overnights a year of placement with his child, the monthly amount of child support would be $1,133 plus a percentage of any income above $80,000 a year that he earns.

The same approach could be used when a parent has a guaranteed base salary but also receives bonus, performance, or commission income above the base salary. Generally, in this scenario, the payer would pay the percentage of his or her additional income within 5 to 10 days of receipt of the bonus, performance, or commission income.

NOTE: If the payer experiences a significant downturn in his or her commission income, he or she would likely want to ask the court for a reduction in child support, because the child support would have been based on income the payer did not actually receive during the year.

Most child support orders must be paid by income assignment. In other words, the child support is garnished from the payer’s income (e.g. directly paid to the state by the employer), so the payer has no control or discretion of whether he or she will make the child support payment. This is true even if the parties agree that the child support can be paid directly between them (even though some judges still allow it contrary to the statute).

The child support payment correlates to the number of pay periods the payer is paid. For example, a monthly child support payment of $1,000 per month would be deducted from a payer’s paycheck at $500 if paid twice a month. If the payer is paid bi-weekly (i.e. 26 pay periods), then $462 is deducted from each paycheck. The amount garnished is then processed through the Wisconsin Support Collections Trust Fund and deposited into a financial account designated by the recipient of the child support. The benefit of having the Wisconsin Support Collection Trust Fund administer the child support payments is that it assures payment for the recipient and provides an objective, third party record of payments for the payer.

Sometimes the income assignment would not be practical. For instance a person could receive commission or bonus income that is subject to a percentage child support obligation. In those instances, the court can allow the payer to pay the recipient directly, with appropriate documentation. In addition, if the person is self-employed and does not have a payroll department per se, then he or she may need to pay the child support directly into the Wisconsin Support Collections Trust Fund by check or money transfer rather than by an income assignment.

Nothing, unless the person takes steps with the Court to modify or terminate the child support.

The child support does not automatically terminate with the termination of employment. The child support obligation continues to accrue even if the payment is no longer being deducted from the payer’s paycheck. This is because the court has no knowledge of the payer’s termination of employment until the payer files a motion to modify or terminate the child support obligation.

For example, let’s assume Kevin loses his employment but mistakenly believes the child support terminated when he lost his job. He later learns that the child support is continuing to accrue despite the fact he no longer has any income. But because he is confident he will obtain new employment in the near future he does not file a motion to terminate or modify his child support obligation. Now, let’s assume six months have passed and Kevin still has not obtain new employment and he is receiving late notices in the mail from the Child Support Agency. He decides to file a motion to modify his child support. The court can only modify or terminate the child support from the date he filed his motion, and not from the previous six months before he chose to file his motion, even though he mistakenly assumed that the child support ended when he lost his job.

CAUTION: The fact that a person “loses” his or her job may or may not be a basis to reduce or terminate the child support obligation. If the payer voluntarily resigned, engaged in gross misconduct on the job, or committed a crime that impacted his employment, the court could determine that the person’s unemployment was willful or unreasonable and therefore continue the child support obligation.

Impact of Shared Placement on Child Support

Generally, the more placement a parent has with a child, the less he or she will pay in child support or the more he or she will receive in child support. The court will determine placement by calculating the number of overnights each parent has with the child on an annual basis. If you have fewer than 92 overnights a year of placement, the straight percentage guidelines will apply to child support (e.g. 17% of gross income for one child). If both parents have more than 92 overnights a year in placement of the child, then a different formula is applied to determine child support which includes consideration of both parents’ incomes and the number of overnights each parent has for the child.

For example, let’s assume Kevin and Andrea have one minor child. Andrea has primary placement of the child and Kevin has six overnights with the child every two weeks, or stated differently, 43% of the overnights a year. If Kevin earns $120,000 a year and Andrea earns $75,000 a year, under the shared time formula for child support, Kevin would owe Andrea $768 per month in child support. In contrast, if Kevin had fewer than 92 overnights a year with the child, his child support would be almost a $1,000 more per month at $1,700 per month. The additional overnight placement reduced his support obligation on the premise that he will be covering more of the day-to-day expenses for the child during his placement time.

If both parents have equal incomes, there may be no child support obligation under an equal placement schedule. However, if there is a disparity in incomes, there could be an order of child support even though both parents have equal time with the child. The shared time formula takes into consideration each party’s income along with the placement schedule in determining child support, so even under an equal placement schedule, the higher income spouse would owe child support under the child support standards. There a variety of reasons why this may be appropriate including, but not limited to, the idea that children should enjoy a relatively similar standard of living between the two homes as if the parents’ had been married.

What are the exceptions to applying the child support standards to the shared time formula?

The court can deviate from the shared time formula if it finds that strict application of the formula would be unfair to either parent or the child, as in the following examples:

A court may apply a doctrine known as “equivalent care,” which allows the court to consider a parent’s actual placement time with the child in determining child support. In a scenario described above, it would be possible for a court to determine, in its discretion, that the father’s weekday placement periods are not considered overnights for determining child support since the ex-wife provides a majority of the care and cost of raising the child during the father’s weekday placement days.

The parents under this scenario would presumptively pay one-half of the cost for hockey because each has 50% of the time with the child. Under the child support standards, parents who have a shared placement schedule (i.e. each parent has more than 92 overnights), the child’s “variable costs” are to be shared according to each parent’s placement time. For example, if a father had 43% of the overnights of placement per year and the mother therefore had 57% of the overnights, the variable costs for the child would be split so that the father paid 43% of the cost and the mother paid 57% of the cost. The allocation of the cost correlates with the placement schedule because it is presumed that the placement parent with a greater amount of time is receiving more child support based on that placement schedule.

This is the starting assumption regarding variable costs but the court may order a different percentage allocation or the parties could agree to a different arrangement regarding the responsibility of variable costs.

“Variable costs” are defined by the child support standards as “the reasonable costs above the basic support costs incurred by or on behalf of a child, including but not limited to, the cost of child care, tuition, a child’s special needs, and other activities that involve substantial costs.” The parents can choose to identify a more specific list of what constitutes “variable costs” to be shared.

Probably not. The allocation of “variable costs” generally occurs only if you have a shared placement schedule (e.g. each parent has more than 92 overnights a year). If you are paying child support based on the “straight percentage” standards, that monthly amount assumes the cost of variable costs. Nevertheless, the court has discretion to deviate from the child support standards if a child does have an extraordinary expense such as private school tuition (not college) or special needs costs, and it would not be fair for the parent who receives child support to pay in full those extraordinary costs.
In most instances, a variable cost will involve a joint custodial decision of both parents. For example, if a parent wants a child to attend a private school at a significant cost, then that parent should be required to obtain the consent of the other parent, because a child’s education is a joint custodial decision. Even when the parents do not have joint custody, they will want a divorce provision outlining the terms and conditions for sharing variable costs. For example, the parties may choose to include a provision that neither parent may incur a variable cost for the child exceeding $100 per month without consent of the other parent.

It depends. If you have joint legal custody of your daughter, then the braces are a medical decision that should be agreed upon by both parents. As for the liability associated with the braces, a judgment of divorce or marital settlement agreement may identify four components regarding child support.

The monthly amount of child support.

The allocation of variable costs for the child if a shared placement schedule.

The allocation of uninsured medical expenses.

The responsibility for payment of any health insurance for the minor child.

Under the above scenario, if the court had allocated the uninsured medical expenses equally between the parents (which is common), that would be a shared expense if both parents agreed to the braces as joint custodial parents. If the parents cannot agree, then either party could seek an order from the court as to whether the child should receive braces, and if so, who should pay for the braces.

It depends. Generally, the divorce decree should include, in the terms and conditions related to variable costs, a schedule and deadline of when the variable costs should be reconciled between the parents. Typically, the parents will specify that each month, or each quarter, the parents will exchange documentation of past variable costs and uninsured medical expenses for the children, and the reconciliation payment be made between them within 15 days.

The reconciliation payment is made outside of the Wisconsin Child Support Trust Fund and directly between the parents. If there is a great deal of animosity between the parents and they do not communicate well together, there are creative options that the lawyer can identify for this exchange of child related expenses.

High-Income & Low-Income Payers

No. The court cannot, even with the agreement of the parents, set a ceiling on the amount of child support that can be paid. The reasoning is that child support is the right of the child, not the parents, so a parent cannot waive child support or set a limit child support in the future. The court has an independent interest in protecting the best interests of the child, including child support, and a permanent limitation or ceiling of child support has been determined to never be in the child’s best interests.

A parent can argue, or the parents can agree, that the amount of child support under the child support standards is so substantial that the court could deviate downward from that amount under the present circumstances. The problem arises if a parent seeks an order that prevents the other parent from seeking additional child support in the future by way of a permanent waiver or a “maximum cap” on the amount of child support.

CAUTION: As of January 2017, the Wisconsin State Legislature is considering legislation that would set a maximum cap on the amount of child support per year for high income payers. You will want to confirm with an attorney if this law has been enacted and how it may impact your own situation.

Depending on the amount of income earned, the payer of child support could qualify for what is known as the “high income payer credit.” Under this credit, monthly income earned at or above $7,000 per month but less than $12,500 per month, is subject to a smaller percentage of child support, and income greater than $12,500 per month is subject to even a lower percentage of child support. For example, if the father above earned $200,000 a year, the first $84,000 of his income would be subject to a child support order of 17% (i.e. $1,190 per month). The amount he earns between $84,000 to $150,000 a year would be subject to a child support order of 14% (i.e. an additional $770 per month), and the income he earns above $150,000 to $200,000 would be subject to a child support order of 10% (i.e. an additional $416 per month). For a total monthly child support obligation of $2,376 which combined is 14% of his income instead of the 17% standard rate.
Almost all income is available for purposes of calculating child support. The definition of income subject to child support is quite broad. A partial list of income available for support includes salaries, wages, investment income, some social security benefits, personal injury and workers’ compensation benefits for loss of income, unemployment compensation benefits, military benefits, and some undistributed income from a business. There are, however, limitations and exclusions. Income that may not be subject to a child support order could include retained business earnings that are necessary for the operation of the business, child support received for another child, food stamps, some public assistance benefits, and foster care payments.
The child support standards allow for a modification downward of child support if the payer’s income is at or less than 150% of the federal poverty standard.
Under the child support standards, the answer is “yes.” The court does not consider the other parent’s income unless the parents have a shared placement schedule (e.g. both parents have more than 92 overnights a year). Even though the former wife earns substantially more, the child support would still apply, because the idea is that both parents have a legal responsibility to provide financial support for their child’s living expenses. This is based on the child support standards, but the father could argue that the application of the child support standards would be unfair to him under the circumstances, and seek a deviation downward from the child support standards or even a complete termination of child support. Whether the father would succeed depends on the discretion of the court.
A court may impute an earning capacity on the mother in this scenario if the court determines that her choice to not work is unreasonable. If the mother had previously worked at a job that paid her $100,000 a year, and the father’s income is also a $100,000 a year, he would have no child support obligation but for the mother’s decision to forgo her career. In this scenario, the father may want to argue that the court should impute the mother with an income of $100,000 when determining child support. Often, this is best done by having a vocational expert testify as to the mother’s earning capacity. The court can look at past earnings of the mother, but when there is not a long or consistent work history, an expert can provide vital evidence and information to the court.

Business Owners and Child Support

It depends. This area of the law continues to develop and different cases have had different outcomes. Many family businesses are pass-thru entities, which means that profit from the business is taxed through the individual owner’s personal tax returns. The challenge is that much of the distribution paid from the company is often paid out to the owners simply to pay the taxes on the business profit. In this sense, the distribution is not income available to the business owner to meet his or her living expenses, but simply to meet a tax obligation of the business entity. The question becomes whether that income should be available for child support. One appellate court has determined that the distribution is not available for child support because it was paid out exclusively to pay the company’s taxes, and the father obligor was a minority interest holder in the company. As a minority interest, he lacked the authority or ability to control the distributions and retained earnings of the business. Under this situation, the court determined that the distributions the father obligor received should not be subject to a child support order. But another appellate court in an unpublished decision (i.e., a decision that is not controlling on other courts) decided that a business owner who had a controlling interest in the company, and received distributions to not only pay the taxes on the business but also as income to the obligor, was available for child support. The appellate court declined to distinguish between distributions paid out to pay the taxes for the business versus distributions received by the obligor as personal income because the courts are required to base child support on “gross income” (i.e. pretax) for wage and salary earners so the same rule should apply for business owners. The court did state that no reason was offered in that case of why the distributions from a business should be treated differently from gross, pre-tax earnings of a wage earner, but did leave the option open for discussion and clarification in future cases.

It is not uncommon for one former spouse to suspect that the business-owning spouse is manipulating the books to avoid either a child support or maintenance payment. You need an attorney who is well versed in family law and familiar with business entities to assure that all of the appropriate income is available for support. In addition, the business owner should have an attorney who is well versed in child support law to assure that the business owner is not overpaying child support at the detriment of his or her business. Often, the attorney will work with an accounting and financial expert to assist in the legal case.

If the company has a significant sum of retained earnings, the question becomes whether those retained earnings are being held to avoid a distribution subject to a child support order, or are those retained earnings necessary for the successful operation, management, or growth of the business.

A great many of factors will be relevant in this inquiry, including, but not limited to, the percentage of ownership of the obligor, past performance of the company, the company’s profit-and-loss statements, the corporate and individual tax returns of the obligor, future plans for the business, any capital improvement projects, the essential functions of the company, and what, if any, living expenses for the business owner are paid by the company.

The person who works for himself or herself, and receives cash for his or her work presents some unique issues for determining child support and maintenance. This often occurs for those who are in a specific trades or service industries such as a plumber, carpenter, server, or hair stylist. However, because consumers most often use credit and debit cards for payment of services, cash transactions have become less common. Nevertheless, a knowledgeable attorney will have resources and procedures to help determine whether an obligor’s cash income is being included for purposes of support. For example, in most cases a Schedule C of the business owner’s individual tax returns will be completed. The attorney will want to review the reasonableness of the expenses reported for the business on the Schedule C. In addition, most depreciation deducted on a Schedule C should be added back to the business owner’s income for purposes of support. CAUTION: A former spouse alleging that he or she is certain that the business owner has been not reporting all his or her cash income “for years,” may be implicating himself or herself for tax evasion. Most married couples file joint tax returns. A former spouse alleging years of underreporting of income during the marriage could be charged with tax evasion for filing a joint return, along with the other former spouse.
Many business owners may have expenses paid by the company that are both business and personal expenses. For example, depreciation or expenses related to a home office, an automobile lease or payment, mileage reimbursement, housing accommodations, cell phone, and entertainment can often be an expense paid by the business. In some circumstances, those payments can be included as income available for child support.
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