Modifying Child Support When a Parent Loses Their Job

Job Loss Does Not Stop Child Support

Many, many people have lost their jobs, or had their hours cut due to Covid-19. Prescott Tax & Paralegal wants you to know that the responsibility to pay child support does not magically disappear if you lose your job, or earn less. To change child support, you must file a request with the court that entered the last order.

Online Tool Available to Calculate Child Support

Usually, the first step in changing a child support order is to prepare a Child Support Worksheet. The Arizona Supreme Court has an online Child Support Calculator to help prepare this worksheet. Check the Arizona Child Support Guidelines to determine what the court considers income in your circumstances.

Do you Qualify for the Simplified Method?

When the Child Support Worksheet is completed, look at the resulting child support amount. Find the difference between the new child support amount and the old child support amount. (Old amount minus new amount.) Then divide this result by the old amount of child support. If the answer is .15 or more, you will usually qualify for the simplified method of changing child support.

Prepare the Court Forms and File

There are court forms and instructions available online for the Yavapai County Simplified Method of Changing Child Support. The court charges a fee for filing this paperwork. You must attach your last 2 pay stubs, or other proof of change in income, such as the letter from unemployment stating what your weekly benefit will be.

When You Need Help Preparing Court Forms

If you are unable to prepare the court forms, and need help, Community Legal Services provides low or no cost help for many legal issues. Prescott Tax & Paralegal can also provide help for a fee.

Change in W4 May Cause People to Owe IRS

What is Withholding?
Withholding is the amount taken from your paycheck to pay federal and state income taxes, and social security and Medicare taxes.  From each pay check an amount is "withheld" and your employer turns it over to the Internal Revenue Service. When too little is withheld for federal and state income taxes, you will owe when you file your income tax return.

Many people owed tax in 2018 due to under withholding. 
In December 2017, the Tax Cuts and Jobs Act took effect lowering the amount of annual tax paid for many tax payers.  However, many taxpayers who filed their 2018 tax returns in 2019 discovered that they owed the IRS. The IRS changed the withholding tables in February 2018, and for many people too little was withheld. The result was that while most taxpayers paid less in annual income taxes, many owed the IRS because too little had been taken from their paycheck.

The IRS revamps withholding for 2020.
Without much media attention, the IRS has revamped the 2020 Form W4 and withholding tables. There are no more exemptions. Calculations for dependents are found in Step 3. The new calculations are designed to have exactly the correct amount withheld. If exactly the correct amount of tax is withheld, you are likely to receive no refund, a small refund, or owe. 

What type of result do you want?
I've found in my years as a tax practitioner, that most people want a refund. They use the IRS as an enforced savings account. They absolutely do not want to owe, and most people are not happy when they get a small refund.  If this sounds like you, then you should consider filling out a new W4 Form.

Fill out a new W4 form in January.

To make sure your withholding is correct, you can fill out a new W4 form for your employer. The new form is not easy. It requires you to estimate other income, such as a second job, or alimony, and tell your employer about it, so the employer can correctly calculate how much to withhold. In my opinion, that is too much information to give to an employer. You must also correctly fill in how many children you will be claiming who will be under age 17 at the end of the year. 

If you are like most people, take these steps.
First, gather your last pay stub from 2019 and your first pay stub from 2020. Compare the withholdings. If it is less, or really different, you may need to change your withholdings. If you want more withheld, you can check the box in Step 2c of Form W4. This will result in an additional $1,000 being withheld over the year (about $38 every two weeks) for a single person.  If you are really concerned that not enough will be withheld, you can add an additional amount to be withheld on line 4c. An additional $75 every two weeks will result in an additional $1,950 being withheld over the year.

What if I need professional help to figure it out?
Call your tax professional and request a W4 check up. Bring your last pay stub of 2019 and your first pay stub of 2020, and last year's tax return. Your tax professional should be able to calculate what the correct withholding should be and help you fill out the W4 to make sure that you have enough withheld, and receive the result you want in terms of a refund. If you don't want to ask a tax professional, you can use the IRS withholding calculator.

Social Media and Family Court

When parents are in a legal battle which involves children or significant property, I often think of the criminal warning, “Anything you say, can and will be used against you.”  Every email, text, voicemail, or recorded conversation becomes a weapon in the war that is waged over children and property.  If the court case is adversarial, more and more, the parties seem to adopt an attitude of anything goes as long as they “win.” Unfortunately, when children are involved, the children are often the losers in the battle as their best interests are trampled in the parents’ battle to win.

At Prescott Tax & Paralegal, we've seen the use of text and email messages as courtroom evidence for some time. Recently, we’ve seen an increase in the use of social media websites as evidence in court proceedings.  One party will gain access to the other party’s Facebook or other such page.  This is not as difficult as it seems. That party then prints off any damaging portions and submits them as evidence against the other party.

While you can control privacy settings to some extent, you must assume what is posted in social media is available publicly.  The half-naked baby photos which were posted for grandma now come under the court’s scrutiny.  The birthday party photos with all the friends pretending to drink out of 2-liter vodka bottles become “evidence” of alcoholism.  The frustrated post about child-rearing which was intended for your best friend shows “evidence” that the parent cannot be trusted with the child.

One attorney I knew always told his clients to remember that every time they texted or emailed the other party, or posted on social media, they should assume they were writing for the court.

If you or someone you know is involved in a court dispute, please understand that unlike Las Vegas, what is posted in social media, doesn’t stay in social media. It could end up in front of judge and be used as evidence to decide legal decision making and parenting time for your children, or how community property should be divided.

Parenting Rights for Unmarried Parents

The most popular month for weddings, June, has passed, and the honeymoons are over.  For those who choose to skip the formal ceremony, did you know that Arizona does not recognize "common law" marriage?  In some states, if a couple has been living together and presenting themselves as a married couple, they are treated as a legally married couple. In Arizona, this is not true.

To be legally married in Arizona, a couple must 1) purchase a marriage license, 2) an authorized person must perform the wedding ceremony, and 3) the signed marriage license must be returned to the court clerk for recording. If a couple does not complete each step, then they are not legally married under Arizona law. Once exception to these requirements are Native American couples who marry according to tribal custom. Still, establishing the validity of such marriages may require court intervention.

When an unmarried couple with children separates, fathers are often surprised to learn that if there is a dispute over parenting time, or decision making, the father may have few rights regarding his children without court involvement.  Even though the father may be on the birth certificate, paternity and parenting rights usually must be established through the court.

To establish which parent will make decisions for the children, and how the children will spend time with each parent, the parents will need to establish paternity through the court and file a parenting plan. If the parents agree, then matters proceed simply. If parents disagree, the court will usually send the parents to mediation to determine how decisions for the children will be made and establish a plan to share the children.  The court mediators work with the parents to create a plan that will be best for the children. This agreed upon plan is signed by the parents and sent to the judge for approval.

If parents cannot agree, then the court will set a settlement conference or trial and the parents will have to explain their position to the court. The court may  make the decisions, if the parents still cannot agree. However, if the judge feels that one parent is being unreasonable, the judge may penalize the unreasonable parent.

A petition to establish paternity, legal decision making, and parenting time has another other important factor: child support.  A child support order will be entered based upon the parents incomes, who is paying for insurance and child care, and how much time each parent spends with the children. The Arizona Courts offer a free child support calculator online.

The above information is specific to Arizona only.

Have a question? Feel free to contact us at (928) 778-3113, through our contact us form, via email, or visit us at www.PrescottTax.com.

Hold Your Horses on Filing Your AZ Taxes

Hold your horses Arizona! AZ residents may want to delay filing their AZ taxes. (Actually, many software packages do not yet permit filing AZ electronically yet.) Historically, AZ will sign a bill to conform to any Federal tax law changes, so the Arizona Department of Revenue prepared the 2018 tax forms with the Federal tax changes in mind. State lawmakers mean well, but throw a monkey wrench in the tax filing season. However, when the State lawmakers put the conformity bill on Gov. Ducey's desk they added a "small" tax cut of $150 million according to the Arizona Star. Lawmakers believe that the changes in the Federal tax code could result in Arizonans paying $150 million more in Arizona taxes. Wanting to avoid a windfall to Arizona, they proposed a tax rate cut to fix the problem. Unfortunately, this retroactive tax cut would require changes to software programming involved in e-filing and THAT is no small feat in an already complicated tax season. Therefore, Gov. Ducey refused to sign the bill stating "Let me be VERY CLEAR on this point: I will veto any budget that doesn't align with these tax forms." What is at the heart of the problem? Generally, Arizona permits the same deductions as used for the Federal tax return. When the federal tax code changed, eliminating or limiting some deductions in favor of a higher standard deduction, Arizona law did not change. Arizona must sign a bill to conform to the federal tax code. However, Arizona has not raised it's standard deduction, therefore, if Arizona conforms to eliminate many deductions, without raising the standard deduction, Arizonans will pay more in income taxes. Lawmakers could have fixed the problem last year. Lawmakers knew that had to pass the conformity bill last year, just as they know every year that there is a change to the federal tax code - which is almost every year. However, the lawmakers adjourned in 2018 without taking any action. Enrolled Agents visited the legislature in January to request that lawmakers take action as soon as possible to conform to federal law. Now, lawmakers want to take action and retroactively add a tax cut. Can they use the windfall to give teachers a bonus? I am not a fan of Arizona income tax increases caused by changes to the federal tax code. I understand the lawmakers position on the issue which could have been addressed last year. However, unless Arizona wants to unduly delay the filing season, we need to move forward. Perhaps Arizona could use the $150 million anticipated windfall and divide it between our 90,000 teachers as a one time bonus of $1667. Or, maybe fix the bone-jarring section of AZ Highway 69 southbound right before Humboldt, AZ. What happens if you file your AZ tax return now? Unfortunately, my approach is unlikely to be even considered. In the meantime, Arizonans are still awaiting a conformity bill before we can begin filing AZ taxes. If you choose to file your AZ taxes before the bill is approved, you may have to amend your AZ tax return.

Avoiding Probate

Probate.  Just mention the word, and chills run up the spine. Some businesses are even targeting seniors to scare them into purchasing expensive estate plans to avoid probate. They hold luncheon seminars telling seniors that a Will won’t avoid probate, and then try to sell the senior a Trust for thousands of dollars. Just because a person has a Will does not mean that probate will be required.  In many cases, there are other, less expensive options that would also avoid probate.

What is probate?

First, let’s define probate. Probate is a court proceeding to transfer assets and settle the debts of a deceased person.  At a minimum, a simple probate in Arizona takes at least 4 months to complete and can cost $1600 or more. A probate proceeding may also be opened if the Trustee of the deceased person’s Trust is not performing his or her duties, or if someone disagrees with part of the Trust.  

What is the best way to avoid probate?  

Stay alive.  Seriously, it depends.  Most Arizona real estate can be transferred with a Beneficiary Deed for less than $200.  That is substantially less than the cost of a simple probate.  If a person owns real estate in multiple states, it may be better to use a Trust to manage the transfer of property.  Depending on your unique situation, a Trust may be the best solution, or there may be other less expensive ways to transfer your assets upon death without a probate.

What type of assets require a probate to transfer?

In general, if property requires the signature of the owner to transfer title or access it, then it may require probate for transfer after death, unless a non-probate transfer device has been put in place before death.

What are some simple ways to transfer property without probate and without a Trust?

This table shows typical assets and ways to transfer without a probate. Some actions must be taken before death.

Property	Signature Required	Non-probate transfer options (MUST be done before death)	Small estate transfer options (After death)
Financial Account	Yes	Name a POD or TOD beneficiary	Affidavit of Collection if less than $50,000
Real Estate	Yes	Beneficiary Deed	Affidavit of Transfer of Real Property if less than $100,000
Motor Vehicle	Yes	Beneficiary Designation Form	Affidavit of collection if less than $50,000
Grandma’s Dishes	No	Give them to the person listed in the Will

How can I decide the best solution for my situation?

You can ask an attorney to decide for you, or you can get information from an estate planning professional like Prescott Tax & Paralegal and make your own decision about what is best for you.

Will having aTrust avoid probate?

Usually. However, if there is a disagreement over distribution, the Trustee acts improperly, or assets were not placed into Trust ownership, a probate may be opened. In a recent case, a probate was opened because the bank incorrectly titled the money market account as The Smith Trust instead of the The Smith Family Trust. When the original trustee died, the bank refused to release funds to the successor trustee because the name on the account did not match the name on the Trust document. The bank refused to pay for the proceeding, and refused to admit their error in incorrectly titling the account. Ultimately, we were able to obtain a court order forcing the bank to release the funds, but not without cost to the heirs was in time and money.

If you have questions about avoiding probate, estate planning, or how to transfer assets of a deceased loved one, call Prescott Tax & Paralegal at (928) 778-3113.

Small Business Owner New Year's Day To Do List

Prescott Tax & Paralegal wishes you a blessed and prosperous New Year!  As we begin a new year there are a few steps that small business owners should take to ensure that accurate income tax returns will be prepared.

1. Get the odometer reading from each vehicle used in business.

Most small business owners use their personal vehicles in for their business. On January 1 of each year, they should take a photo of the odometer, or write down the odometer reading of each vehicle used in the business. Having the odometer reading helps your tax professional determine the percentage of business use of the vehicle.

2. Start a new mileage log to keep track of business miles.

The IRS requires that a written mileage log be kept if you claim mileage for your business. Apps such as MileIQ or Everlance can be downloaded onto your smart phone to keep track of mileage. To have an acceptable mileage log, you must keep track of the date, miles driven, and business purpose. For example: 1/1/2019, 12.2 miles, to office supply to pick up W2 forms.

3. Determine if any contractors need to be issued a 1099Misc.

If a non-employee received compensation of $600 or more, the IRS requires you to issue that person a 1099Misc. To issue the 1099Misc, you will need: Name, Address, Social Security Number, and Total amount paid during 2018. If you need help preparing forms 1099Misc or determining who should receive them, contact your tax professional. These forms must be mailed to the contractor and the IRS by January 31.

4. Prepare and issue W2s for employees.

If you have employees, prepare and issue forms W2 for your employees, or have your payroll provider do this. Forms W2 must be mailed to the employee and the IRS by January 31.

5. Complete bookkeeping.

Many small business owners do their own bookkeeping using software or ledger sheets. Finish your bookkeeping early. There is no good reason to wait. Most small business owners should be filing the business tax return in January. If the business is a partnership, or s-corp, then the owners or shareholders can receive the necessary documents to complete their individual tax returns. If the business is sole proprietorship, the income tax return can be completed early in the season when your tax professional is at their best.

Will the government shutdown affect filing my income tax return?

Right now, we are told that there will not be any delay in "filing" income tax returns. However, REFUNDS WILL NOT BE ISSUED UNTIL THE GOVERNMENT SHUTDOWN CEASES. Please plan on that. There is nothing your tax professional can do to hurry the refund. No, you should not wait to file your income tax return until the government shutdown ceases. File as your normally would - as early as possible.