One Solution to Cash Flow Issues with Guidelines Support Orders

Ever since the enactment of maintenance guidelines as of January 1, 2015,
maintenance is now determined by a formula based on both parties’ net incomes.
The result has often been harsh for some parties if it is combined with guidelines
child support, resulting in an award that is more than 50% of a party’s net monthly
paycheck. And although the payor will receive a tax-credit at the end of the year,
that does not always alleviate the month-to-month cash flow issues.
Unfortunately, the statute does not provide any relief besides the end-of-year
tax credit. However, I have been able to negotiate a net maintenance award with
the opposing party since the opposing party will benefit from not having to pay
taxes on the maintenance at the end of the year.
Here is how it works. Current guidelines maintenance is based on the
following formula:
The amount of maintenance under this paragraph shall be calculated by taking 30% of
the payor’s gross income minus 20% of the payee’s gross income. The amount calculated
as maintenance, however, when added to the gross income of the payee, may not result
in the payee receiving an amount that is in excess of 40% of the combined gross income
of the parties.
Because the maintenance is based on gross even though the payor has
already paid taxes on that gross through his employer, the payor is entitled to a tax
credit for the taxes paid on that maintenance and the payee will be required to pay
taxes on that maintenance at the end of the year. To avoid this and allow the payor
more cash flow throughout the year, one way to calculate a net-maintenance award
would be to apply the formula above to net figures only.
The numbers may not be exact but it is one way of determining a net
maintenance award and settle the case by agreement. Another way to determine
this amount would be through specialized programs that most divorce attorneys
subscribe to and that have the ability to calculate tax formulas. Finally, to be very
exact, the parties can seek out a CPA to estimate a more precise number.
In the end, a Judge or party is not required to take this route. However, I
believe using a net-maintenance calculation mutually benefits both parties. Talk to
an attorney to see if this is an option in your case.