Friday, July 31, 2015

Virginia Child Support for the Self-Employed - What to do when you don't have a "salary"

As always, before reading this post please review my disclaimer by clicking on the link above or by clicking on this link.  As always, any legal principles discussed herein apply only to the Commonwealth of Virginia.

Introduction

When I first discussed how child support is determined, I noted that, in theory at least, most cases of child support involve a relatively simple calculation.  You plug in each parent's income, any support for other children, work-related child care, and health insurance costs, and then a formula puts out how much child support should be.  In that same post, I mentioned a number of complications that sometimes arise that make the formula itself more complicated.  What I did not do, however, was get into some of the complications that make calculating the very numbers that go into the formula difficult.  Almost every number that goes into the formula could have one or two blog posts of its own to discuss - but how to determine "income" is probably the one that could have by far the most.  In today's blog post, I will discuss just one of those potential income calculation complications - self-employment.

When the formula for child support was derived, legislators envisioned two of your "typical" parents.  People employed by companies that pay them a consistent and pre-determined salary.  Yet, in the real world, truly "salaried" employees are not nearly as common as we think, and the law applies to all parents in child support situations.  One type of parent is going to be those who are self-employed.  Your typical self-employed individual not only has no salary, but has an "income" that varies from year to year, month to month, even day to day, depending on how business is going.  How on Earth do we calculate that person's income to go into the child support formula?

Child Support Based on "Current" Circumstances

One of the first rules of child support is that all numbers used in the child support formula are supposed to represent the parents' current situation.  Your current situation, however, includes the fact that you likely still have money from a previous month's income, and are making plans in accordance with what to expect in a future month.  Not to mention, since income every day can change, how do we project a monthly income number (which is what's used in the formula) on the very day of the court hearing?

No Single Formula

It might not surprise you to know that, since self-employment income can be so fact specific, the Court of Appeals and Virginia Supreme Court have never adopted a single formula or test for determining a self-employed person's income.  In fact, the appellate courts have upheld a wide array of tests and formulas used by trial judges under what's known as the "abuse of discretion" standard of review - meaning a trial judge will only be reversed if his means of calculating income was pretty obviously unreasonable or based on an error of law (such as saying support is based on past income, rather than on an attempt to determine current income).  This means that you will need to convince the judge of what means of calculation best reflects the self-employed individual's current income.

My general approach is that if the self-employed individual is in the same job as he was the previous year, and there's not been a substantial shift in the market, I will start with the business income reported on the individual's taxes the previous year.  Then, I will review all of his deductions to remove deductions that were not true "business expenses" (since "gross income" is the measure of income for child support) to yield a final "gross income" number for the previous year.  Finally, I will ask for statements showing monthly revenues the previous year and monthly revenues this year to do a year to year same-month comparison (comparing January to January, February to February, etc.).  If I see a consistent year over year increase or decrease, I will apply that percentage increase or decrease to the previous year's final number to get my anticipated "current year" income number, which I will then divide by 12.

Obviously this formula is not perfect, and I don't apply it to every situation.  Sometimes I'll use a three year, or even five year average, and other times I'll purely extrapolate using current year numbers, but the above method is the one I use most often, and usually find success (meaning acceptance from the court) with.

Try Multiple Formulas

This is also one of those situations where each party can likely reasonably make a claim to numbers that are more beneficial to them.  If you find a formula that gives you a better number (a higher income if it's the other side that's self-employed, or a lower income if it's you that's self-employed) and you can honestly say that your formula is reasonable, then there's no reason you should not be able to fight for the court to use that number.  As a result, if you can think of multiple reasonable formulas, you should test them all out to see what numbers they yield for you.  Hopefully the numbers will be similar to each other, but they may not be, especially if the self-employed person had one unusually good or unusually bad month or year.

No matter what, however, when you find the formula you want to use to calculate the self-employed person's income, be prepared to argue why that formula is the best way to estimate that person's "current" income.  In the end, you need to convince the judge that the formula you used to calculate is the right approach, not necessarily that the number you found is the right one.

A Quick Reminder About Taxes

Remember that child support uses "gross income" which means that it uses income prior to the application of taxes.  However, purely using gross income would put self-employed individuals at a disadvantage.  When you are employed by a business, that business pays half of your Social Security and Medicare taxes for you, and the part that your employer pays is not part of your gross income - so your gross income is calculated after that part of the tax has been paid for you.  For a self-employed person, however, they don't have an "employer" to pay that half of the tax, so self-employed people pay the full tax (this is called the "self-employment tax").

So, for a self-employed person, his "gross income" for child support is higher than the "gross income" of a non-self-employed person with the same actual income.  As a result, the child support formula reduces half of the "self-employment tax" (the same share that would be paid by a private employer) from a self-employed person's gross income for child support purposes.

Conclusion

Child support is already a confusing and complicated set of calculations.  When one parent is self-employed, figuring out that parent's income can create a whole new host of issues.  If you are in a child support dispute, you or the other party (or both) are self-employed, and you need help with figuring out incomes, please feel free to call (703)281-0134 or e-mail me at SLeven@thebaldwinlawfirm.com to set up a consultation.  Our initial consultations are free for up to half an hour!

Friday, July 17, 2015

FAQ on Same-Sex Marriage

As always, before reading this post, please review my disclaimer by clicking on the link above or by clicking on this link.  As always, any legal principles discussed apply only to the Commonwealth of Virginia.

Introduction

Ever since the June 26th Supreme Court ruling in Obergefell v. Hodges made same-sex marriage legal nationwide, I've been inundated with questions from friends, family members, and former, current and potential future clients.  There are a lot of changes that this ruling brings, and a lot of people don't understand how this ruling affects them.  To that end, with this post, I hope to answer some of the most common questions I have been asked.

What impact will this ruling have on me, as a heterosexual, married person?

The ruling should have no impact on you at all.  The ruling did not change the status of any existing "traditional" marriages - it just added new people to the mix of who could get married.

Will this ruling eventually allow people to a) marry relatives, b) marry animals or inanimate objects, and/or c) marry multiple people at once?

Probably not, no, and maybe.  If the two relatives are both adults, consent to the marriage, and appear to be absent of any coercion, there could be an argument made that the logic applied to same-sex marriage here - that there is a basic right to the dignity of marriage for those who choose it - could allow for this marriage.  I would have two reasons why I would argue otherwise, however.  First, Obergefell was based on the notion that it was state-sanctioned discrimination against homosexuals that caused same-sex marriage to be outlawed - but what group of people is discriminated against when you bar marriage to relatives?  To date, attraction exclusively or primarily to relatives is not known or understood to be an inherent, immutable trait the way we now understand homosexuality to be, so the fact that bans against relative marriage are not discriminatory would likely uphold them.

Second, there could be a compelling state interest in forbidding relative marriage - children.  While states tried to say that same-sex couples' inability to have children was a compelling reason to disallow same-sex marriage this was ridiculous, because we allow many people who cannot have children to get married.  However, in relative marriage, you face the possibility of people who can have children but really shouldn't due to the extensively researched genetic problems that arise when relatives have children together.

To me, while I can see the argument, those two reasons combined would prevent courts from extending Obergefell to incestuous marriage.

As for marrying animals or inanimate objects - this argument has always struck me as absurd.  Marriage can only be awarded to two individuals who consent thereto.  Neither animals nor inanimate objects are capable of offering their affirmative consent to a marriage.  That alone makes Obergefell inapplicable to such marriages.

As for polygamy, this is the toughest.  The two exceptions that I raised which would prevent incestuous marriage to proceed don't apply here.  First, a large number of people belong (or claim to belong) to religious sects that authorize and even require plural marriage.  There is a discrimination argument to be had, then.  Moreover, there is nothing inherently wrong with people in your standard plural marriage having children.  I am inclined to believe that the courts will find that, since there are government financial benefits associated with being married, the government has a compelling interest in limiting the size of marriages so as to prevent the cost of those benefits from getting out of hand.  However, I am also inclined to believe that laws making plural marriage criminal (rather than just unrecognized by the state) are likely to be struck down in the not too distant future.

Will my church be forced to conduct same-sex marriages?

No, no it will not.  How do I know?  It's been fifty years since the Supreme Court said interracial marriages were required to be allowed, and there are still churches that refuse to marry interracial couples without consequence.  The arguments that pastors are going to be rounded up and churches forced to allow marriages to happen inside, are largely ignorant fear-mongering.  This is due to the combination of the free exercise and establishment clauses of the first amendment to the constitution largely forbidding the government from interfering in the internal religious conduct of churches.

Now, note that I'm just talking about churches here.  "Public accommodations" are businesses that offer goods or services in exchange for payment to the general public.  These do not include churches.  These frequently do include, however, wedding photographers, wedding bakers, wedding florists, etc.  Many states have laws banning public accommodations from discrimination on the basis of sexual orientation (along with race, religion, etc.).  In those states, a florist cannot refuse to serve a same-sex wedding any more than she can refuse to serve an interracial wedding or a Jewish wedding.  Public accommodation laws are well-known, and if one's religion will prevent them from following those laws, that person should not be entering the business.

I got married to my same-sex partner in Vermont in 2012 - how does this ruling affect me?

So, your marriage was recognized by the federal government in 2013 due to the Windsor case, so this ruling doesn't affect you particularly.  However, if you moved to Virginia prior to October, 2014, when Virginia began recognizing same-sex marriages, it means you may very well have some property issues here.  For example, if you purchased a home, you couldn't do it as "tenants by the entirety" - a favorable status of ownership that's allowed only to married couples.  It may be worth re-titling your home so you can take advantage of this status.

In short, my recommendation to all people who were legally married to a same-sex partner prior to October of 2014 but lived in Virginia is to consult an attorney regarding both all property you own and your estate planning documents, to make sure nothing needs to be updated.

I married my same-sex partner in a church in Virginia in 2012 - does this ruling mean my marriage must now be recognized by the state?

NO!  If you married in a religious or civil service a same-sex spouse in a state that did not allow such marriages prior to that state allowing them, neither this ruling nor any other court case allowing same-sex marriages retroactively legalized your marriage.  This is because most states have requirements beyond merely getting married in a church to become legally married, and Obergefell did not relieve you of meeting that requirement.

In Virginia, for example, to get married, you must a) get a marriage license, b) get married within 60 days after that license is issued, and c) return the license to the court where you got it within 5 days of getting married.  Before Obergefell (and in Virginia, before Bostic v. Rainey), you couldn't get a marriage license, meaning that your marriage did not comply with requirement a or c.  As a result, you must now go get legally married in order to have your marriage recognized.

Conclusion

While Obergefell finally brought some clarity to issues of same-sex marriage, we still must deal with the realities of more than a decade of such marriages being allowed in some states and not others, as well as in some churches and not others.  This will likely create issues for a few decades to come.  If you have any question regarding the effect of this ruling on your own situation, please feel free to call (703)281-0134 or e-mail me at SLeven@thebaldwinlawfirm.com to set up a consultation.  Our initial consultations are free for up to half an hour!