RJ <sullywaly[at]yahoo.com> wrote:
- quote -

I can't answer for state child support agencies, but for
federal tax purposes, there is absolutely no requirement that
child support payments go directly for the benefit of the
child.

The state court that orders this payment or a state agency
might or might not have an interest in knowing how the child
support moneys are spent, but this is not a federal tax issue.

Here in Ohio the only monitoring that would be done is to
asssure that those obligated to make child support payments do
so.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

Thanks to everybody on this forum for responding to my qns.
You guys are doing a great job on this forum.

Art,

Thanks for the link. Based on all the responses I got from
the forum members, it looks like it will be beneficial for
me to get help.

If somebody knows a good CA in the GrandRapids/Muskegon
area, please send me an email with their contact details.

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

Phil Marti wrote:
- quote -

Phil,
There was no split of the retirement assets nor am I paying
alimony (wife is in the same income range). Based on the
income shares method of child support calculation (for
michigan), it came out to be nearly one-half of my salary.
I understand when you say that this money is for the kids,
but what is the procedure or oversight from any system which
makes sure that this money is spent on the kids and only the
kids. I dont think there is any accountability required on
my ex-wifes part. Am I wrong?

Thanks.


<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

Ex-wife and kids are still staying in the same house. She
will be moving out in September (various reasons best not to
go into in a public forum). As part of the divorce
settlement, we decided to take exemptions for the 2 kids in
alternate years. This year, I will be taking the exemptions
and since the kids will be staying with me for over half an
year, I will be filing as HOH.

I hope this explains the situation to some extent as well as
some of the doubts raised by the other responders.

I will respond to the other posts as well later in the day.
Thanks!!

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

Arthur Kamlet wrote:
- quote -

Based on the data provided, the children lived with both
parents together in the same abode for more than 6 months.
In addition, based on the data provided, the children fall
under the rule for children of divorced or separated
parents. As such, the custodial parent is defined as that
parent for whom the child lived for the greater part of the
year. The custodial parent is entitled to the dependency
exemptions. If the custodial parent desires to release the
claim to the other parent, then there MUST be a signed
written declaration that meets the requirements of Form 8332
(or just use Form 8332) provided to the noncustodial parent
that MUST be attached to that parent's tax return.

As the children fall under the rule for divorced, separated
or never married parents, there is no tie breaker rule as
the child is not the qualifying child of both parents.
Basically, IRC Sec. 152(e) supersedes the relevant parts of
152(c).

A noncustodial parent can file as HOH, as long as the
noncustodial parent can show that he/she paid more than half
the cost of keeping up a home that was the principal place
of abode for more than half of the year for him/herself and
a qualifying child as defined in Sec. 152(c) (not 152(e)).
It is possible for a noncustodial parent to meet this
definition in the year that the parents stop living
together.

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << If you want a professional tax opinion, you are advised > << to contact a Certified Public Accountant, an Enrolled > << Agent, or a Tax Attorney. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

Phil Marti <prm20871[at]verizon.net> wrote:
- quote -

I might have misread this as saying both parents lived with
the kids more than half the year, which, if true, makes the
children qualifying children of both. The tie-breaker rules,
if invoked, give the right to claim to the parent who lived
with the kids longer or, if no difference, to the parent
with higher AGI.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << If you want a professional tax opinion, you are advised > << to contact a Certified Public Accountant, an Enrolled > << Agent, or a Tax Attorney. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

"RJ" <sullywaly[at]yahoo.com> wrote:

- quote -

Something's amiss here. If the children live with you more
than half of 2006, your wife has no say in the exemptions.
Whoever had physical custody of them for more than half the
year controls the exemptions.

If you provide more than half the cost of maintaining a home
in which the children live with you for more than half of
2006, you qualify for HofH filing status. If they weren't
with you more than half of the year, you don't qualify even
if your wife allows you to take the personal exemptions.

<snip
- quote -

What you're saying here, coupled with an unquoted remark
about negative income, makes no sense, except that you are
understandably not happy. What exactly do you mean by her
getting half your income? If you're paying alimony, that's
taxable to her and deductible by you. If you're talking
about child support, that's money for your children's
support, not hers, and it's not deductible. If you're
talking about a split of retirement assets, done properly
there is no current tax consequence to you.

--
Phil Marti
Clarksburg, MD

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

RJ <sullywaly[at]yahoo.com> wrote:

- quote -

If possible, it would be a veruy good idea for you to have
her sign Form 8332 waiving her right to claim the exemption
for the child to you for tax year 2006. Technically your
situation does not require such a waiver, as it comes under
the tie-breaker rules, but since the IRS has not co,me up
with a waiver form for the tie breaker rules, your wife
could possibly change her mind in the next couple of years
and you would be out of luck. So try to have her sign the
8332.

- quote -

Conversion income is stacked on top of other income and is
taxed as ordinary taxable income at the marginal tax bracket
you happen to fall in.

- quote -

If this is labeled alimony and in fact it is alimony, you
can deduct it. But you cannot deduct alimony for the period
in which you live together.

- quote -

Ask around for recommendations. Or search for Enrolled
Agents (www.naea.org) or CPAs who deal in individual tax
issues in your area.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

Herb / Arthur,
Thanks for the kind response and suggestions. I do have some
follow up qns though...

1. My wife has agreed for me to take the exemption for this
year for the kids. They will be with me for more than half
of the year so I think it is safe to assume that I will be
filing as HOH in 2007. Next year will be a totally
different story.

2. I will not be filing as exempt. I had the default
allowance on my W4 for all these years and because of the
lurking possibility of negative income post-divorce, I had
to make adjustments wherever possible. I am not planning to
pay any penalty for underwithholding, so I will be
monitoring the YTD taxes and send a check to IRS before the
cutoff date.

Herb, I calculated the allowances from the IRS website
(based on taxes already paid till June / deductions I will
be taking / filing status).

3. I had filed taxes for last year using Turbo Tax and the
'effective tax rate' was 11.87%. The tax bracket is probably
in the 15-25% range. Just to clarify on the IRA, it is
actually a Rollover IRA from a previous employer and hence
pre-tax. I think it will be prudent to convert into Roth in
phases depending upon what the tax situation looks like. For
this year it looks like I will remain in the lower tax
bracket. Are the conversions taxed at the highest % of the
tax bracket I would be in - in this case 25%?

4. My ex-wife gets half my income and she does not even have
to report it? Stupendous. All hail our great family
'justice' system.

5. Can you or somebody else on this forum be kind enough to
give a reference of a good accountant in the Michigan / GR
area? What kind of fees can I expect for this kind of
service? I am in a frugal-living mode for at least 6 months
till I recover from the financial impact of the divorce.
Unfortunately I have been asked to go on an intl assignment
for probably 2 months which complicates the situation
further. So a person with some knowledge of US tax laws as
pertinent to intl tax treaties etc will be worth the money
spent.

Thanks for all the help and support!!

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

"RJ" <sullywaly[at]yahoo.com> wrote
- quote -

No. If you are single as of the end of the year (December
31 at midnight) then you file single for the full year.

- quote -

You need to work through your numbers for the current year,
based on filing single, and see where you stand.

You can adjust your withholdings if need be, or make
quarterly estimated tax payments.

- quote -

For a single filer, I doubt you'll be in the 12% tax bracket
unless you have significant deductions.

- quote -

The conversion will be taxable at whatever rate you end up
at when you add your IRA conversion income.

- quote -

Prepare a dummy return using the known income and known
deductions.

- quote -

No. Nor does it qualify you for HOH status, nor does it
entitle you to claim the kids.

- quote -

Your situation is complex, and you are aggravating it with
an IRA conversion. Seek professional tax help from a local
CPA or EA.

--
Paul A. Thomas, CPA
Athens, Georgia

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

"RJ" <sullywaly[at]yahoo.com> wrote

- quote -

I'm always looking for loopholes. Unfortunately I do not
see one here. "More than half the year means 183 days in
most years and 184 days in a leap year. Either way it comes
out as "after July 2nd".

What was the date on your divorce? On what date did you or
your children cease to live together? Is there anything
about this in your divorce decree?

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

RJ wrote:

- quote -

Your filing status for 2006 is determined by your marital
status as of 12/31/06, probably Single. If you are the
custodial parent of the children, then you might be able to
claim Head of Household status. One or more of the children
has to live with you.

- quote -

Since you will be divorced for 2006, your tax liability is
likely to be somewhat higher than in the past, as you will
lose the exemptions for spouse and (possibly) children. In
addition, your Standard Deduction will be cut in half,
making more of your AGI taxable. I don't understand where
you are getting the "19 allowances", especially if you are
in such a low tax bracket. The "safe harbor" is if you pay
in at least 100% of your 2005 tax liability (through
withholding) there will be no underwithholding penalty.
Similarly for state tax.

- quote -

There is no 12% tax bracket, at that income level you are
more likely in the 25% tax rate bracket. Remember, you will
be filing as Single for 2006.

I am planning to
- quote -

The Roth conversion will add that amount (25K) to your AGI,
and will be taxed at whichever marginal tax bracket that
drops you into. Do a dummy return using 2005 forms and tax
tables, as they will not change much for 2006. The tax
calculated will be slightly higher than the actual tax due.

- quote -

Never, no way, nada. It is not income to your ex-spouse
either.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

RJ <sullywaly[at]yahoo.com> wrote:

- quote -

If the children (at least one) meet the rules to be your
qualifing child (See IRS Publication 501) which include both
of you living in the same household over half the year, or
if they meet the rules to be a qualifying relative, then you
might be able to claim HoH based on you providing more than
half the household support for more than half the year.

Now it is possible that the children will be qualifying
children of your ex- too. If so, then the parent who lived
with the child the longer time can claim the child as a
qualifying child. If that's your ex-, she would have to
agree to allow you to claim the child, and thus claim HoH.

See the tie-breaker rules in IRS Publication 501.

- quote -

If you have any tax liability last year or this year, you
cannot file a W-4 as exempt. You have to go with that 19.
Until recently the employer would have had to notify the IRS
that you claimed 19, but that's no longer the case.

You have a safe harbor if you have had at least 90% of your
2006 tax withheld. That means no penalty.

You also have a safe harbor if you had 100% of your 2005 tax
withheld, but if you filed jointly for 2005, you will have
to compute your portion of the tax. And when you file form
2210 to calculate any possible penalty due for
underwithholding, you will check the box on that form saying
last year you filed joint, this year not.

See Pub 505 and the instructions for the W-4 form for more
information.

- quote -

15% perhaps? But not not filing joint, tax may increase.

- quote -

A dummy return is a good method. If your IRA was all
deductible, the amount converted will be taxed as ordinary
income and could push up your tax bracket.

- quote -

Child Support is never deductible, and is not taxable income
for the recipient.

Over all, you have more than enough questions that a visit
to a local tax professional could be very beneficial.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

Hello,
I need some help in my tax planning for this year.

1. I recently got divorced but wife and kids were in the
same house for more than half the year. Can I file next year
as Head of household?

2. Because of my current financial situation, I have asked
for 19 allowances on my tax withholding (based on the form
on the IRS website). Per the calculation, I dont need to pay
any more taxes for the rest of the year. I will update it
again next year. How do I determine the minimum tax that I
need to pay for this year (just to be on the safer side)?
Similarly for state tax withholding. What is the miinimum
tax and how do I actually submit an exemption?

3. I am in the lower tax bracket (I think 12%) with income
most probably less than 80K for this year. I am planning to
convert my IRA (approx 25K) into a Roth IRA. How can I find
out how it will affect my taxes? I was thinking of preparing
a dummy return assuming this years situation. How do you
suggest I find a good way of determining my 'exact' tax
liability?

4. I would start paying child support this month. Is this
tax-deductible?

Any pointers / suggestion will be greatly appreciated.
Thanks.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >