As we near the end of the year, people are beginning to think about tax preparation. Divorced parents often have a number of questions about the tax implications of child support payments. A frequent question that arises is whether a tax refund can be considered in determining child support.

Currently, Illinois use a “percentage of income” formula to determine child support payments. The formula calculates child support by taking a flat percentage of the noncustodial parent’s net income, based on the number of children he or she supports. Generally, the Illinois child support guidelines are as follows:

Number
of Children

Percentage of
Supporting Party’s
Net Income

1

20%

2

28%

3

32%

4

40%

5

45%

6 or more

50%

 

While child support payments are established based on net income, “net income” can be difficult to define at times. Net income generally means “all income from all sources” less deductions permitted by Illinois child support law, but it is a flexible concept that may be evaluated differently by different judges. For instance, gifts and loans may or may not count as income depending on the circumstances and the view of the presiding judge.

If the paying spouse received a tax refund due to a change in circumstances that did not exist at the time the existing child support order was approved, the paying spouse may be required to pay a portion of the tax refund to the receiving spouse. Child support is established based on net income, so if an inappropriate amount of taxes are withheld and then refunded, the refund should have been part of the paying spouse’s net income. For example, if the tax refund is due to excessive paycheck withholdings, the tax refund will probably be considered net income to the paying parent.

If you believe that your former spouse received a tax refund that could impact child support payments, it is important to consult with an attorney. Illinois law does not allow self-adjusting child support arrangements so child support awards remain in effect until one of the parents makes a request for a modification of the child support arrangement. Court approval is required in order for the modification to have legal effect.

It is important for parents to remember that child support payments are nontaxable payments, which means that the paying parent may not deduct the payments from his or her gross income and the receiving parent does not include the payments in his or her gross income. Unlike child support payments, however, spousal support payments are taxable income to the receiving spouse and deductible to the paying spouse.

If you have questions regarding the impact of a tax refund on your child support payments or any other child support questions, contact Palatine divorce attorney Michael Meschino at (847) 991-7090 to learn more about Illinois child support laws.