Indiana Child Support and Taxes
Anyone who is subject to a child support order can attest that there are many facets of support obligations that are confusing and unclear. Given this, it’s no surprise that the Indiana family law attorneys at Keffer Hirschauer LLP receive many questions about child support, including how it’s determined, how it’s disbursed, and the penalties for not paying a child support obligation. Furthermore, many individuals have questions regarding orders of Indiana child support and taxes, and the rules and regulations governing both deductions and tax refund offsets for a child support arrearage.
This article will address some of the tax-related topics associated with Indiana child support. However, if you have concerns about an Indiana child support order and/or your financial obligations, it would best consult with an experienced Indiana attorney with a background in family law. To speak with an Indiana child support attorney from our Indianapolis law firm today, call 317-857-0160 or complete our online contact form to schedule a free consultation. Our attorneys understand the many nuances of Indiana child support laws and are available to help understand how they relate to your specific situation.
The Basics of Child Support
Per Indiana Code 31-16-6-1, child support orders are an action in which the court may order either parent or both parents to pay any amount reasonable for support of a child/children, without regard to marital misconduct, after considering all relevant factors. When crafting a support order, courts determine which parent must pay child support, and to what extent, by using the child support formula contained within the Indiana Child Support Rules and Guidelines.
The child support calculation considers the following factors:
- The number of the parties’ children
- Each parent’s gross income
- Each parent’s child support obligations to other children
- Spousal maintenance obligations
- Work-related childcare costs
- Health insurance premiums for the children
- Post-secondary educational expenses, if applicable
- The number of parenting time overnights allocated to each parent
Most commonly, the non-custodial parent is the one who assumes the obligation of child support. In turn, the custodial parent (usually the one with whom the child resides more than 50% of the time) is the one who collects the support and uses it to cover the basic costs of supporting the child. This may include costs related to housing, food, clothing, education, child care, insurance, etc. They may also use child support funds to cover extraordinary costs, such as unexpected medical bills or extracurricular fees.
Once a child support order has been made by the court, the parent obliged to provide support must do so. If they fail to provide support, they may incur financial penalties and risk being held in contempt of court. Furthermore, in Indiana, courts have the ability to suspend various licenses, such as a professional license or a driver’s license, in an effort to force an individual’s compliance with a child support order.
Indiana child support payments can be made in a variety of ways. Most Hoosiers elect to pay online via ChildSupportBillPay.com. Although this method requires a convenience fee of 2.25% and some background information. Payments can also be made by writing a check, money order, cashier’s check or certified check to the Indiana State Central Collection Unit.
In addition, individuals obligated to provide child support can pay in cash at the County Clerk’s office. The Clerk’s office will then proceed to record the payment and forward the money to the custodial parent.
Finally, the non-custodial parent can provide their support obligation to the custodial parent directly. However, this is not recommended by most Indiana family law attorneys (but can be appropriate in limited circumstances.) If a dispute arises at some point, there would be no proof of payment, which could further complicate matters.
Indiana Child Support on Tax Deductions
Regarding Indiana child support and taxes, Indiana Code 31-16-6-1.5 states that the court shall specify, within the child support order, which parent of the child may claim the child as a dependent for the purposes of both federal and state taxes. When making this determination, courts shall consider several factors. This includes the value of the claiming the child as a dependent as the marginal tax rate of each parent; the income of each parent; the age of the child and the number of years that they could be claimed as a dependent; and each parent’s percentage of the costs supporting the child. If applicable, the court may also consider the financial aid benefit for post-secondary education for the child; the financial burden each parent assumed under the property settlement in a divorce proceeding; and any other relevant factors.
If a court does indeed designate the non-custodial parent of the child as the one who may claim the child as a dependent, the court must also order the custodial parent to take all actions necessary to release their claim to the exemption in the manner required under Section 152(e) of Internal Revenue Code.
If the custodial parent refuses take the actions necessary to release their claim to the exemption, the court may then hold them in contempt of court and/or lower the non-custodial parent’s child support payment to compensate for the extra taxes the individual would have to pay in the absence of the deduction.
In addition, if the noncustodial parent is ordered to pay child support and allowed to claim the child as a dependent, the court must also include in the order a provision stating that the noncustodial parent may make that claim if they have paid at least 95% of their child support order for the calendar year.
Indiana Child Support on Taxes and Arrearage
The rules and regulations on Indiana child support and taxes are clear on the topic of arrearage. If a non-custodial parent currently owes a child support arrearage, any tax refunds that would otherwise be paid to them will be intercepted by the Internal Revenue Service (IRS), applied to the child support debt, and assessed a federal offset collection fee.
It’s important to note, however, that only eligible cases receiving services through the Title IV-D Child Support Program are able to receive this offset. Currently, the eligibility thresholds are an arrearage of at least $150, if the family has received Temporary Assistance for Needy Family (TANF) benefits, and $500, if the family has not received TANF benefits.
If a non-custodial parent has been notified that their federal income tax refund has been offset for child support arrears via written notice from the Department of Treasury, and does not agree with the amounts listed, they may contest the determination. To do so, they’ll need to request an administrative review by contacting the County Prosecutor’s Title IV-D office where their case is located.
Indiana state income taxes may be subject to tax refund offsets, as well. Per the Indiana Department of Child Services, cases with delinquent child support amounts in excess of $150.00 are eligible for the state’s income tax refund offset. If a non-custodial parent’s refund is subject to an offset, they will notified via mail delivered to the address provided on their state tax return. This notice will show the amount of the refund, the date the offset occurred and will provide the county Prosecutor’s Title IV-D office that is responsible for the submission.
Again, if the non-custodial parent does not agree with the arrearage amount of the amount of the state income offset, they may request an administrative hearing to contest the interception of the tax refund. This request must be received by the Indiana Centralized Enforcement Unit within 30 days of the date on their written notice.
Further Questions about Child Support?
Trying to decipher the rules and regulations surrounding Indiana child support and taxes can be confusing, and it’s certainly not a do-it-yourself venture. If you need expert assistance with a matter related to child support, you’ll want to speak with an experienced child support lawyer in Indiana. The family lawyers at Keffer Hirschauer LLP understand just how stressful matters of child support can be and are available to help you understand what’s at stake given your specific situation. To speak with an attorney today, call 317-857-0160 or complete our online contact form to schedule a free consultation.