HOW TO FILL OUT AN INCOME AND EXPENSE DECLARATION OR FL – 150

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Experienced Bay Area family law attorneys will tell clients that money is one of the most difficult and important aspects of divorce in California.  Your Income and Expense declaration or FL 150 may be the single most important document for your dissolution. This post explains why reporting your current earned and passive income accurately can make a huge difference in the outcome of your case.

If your case does not involve a request for spousal support or attorneys fees, there are 15 Items that you must fill out on an Income and Expense Declaration.

Before you start to fill this form out you should gather the following documents: (1) recent pay stub, (2) tax returns, (3) retirement accounts, (4) income from any rental properties, (5) monthly budget or expenses.  

1.    EMPLOYMENT INFORMATION:  Take this information directly from your pay stub. 

2.    AGE AND EDUCATION: Basic personal identifying information.

3.    TAX INFORMATION:  Take this information directly from your tax return.

4.    OTHER PARTY’S INCOME: It is best to be as accurate as possible. Ask for your ex-spouses pay stub.

5.    INCOME:

a.     Salary – Gross salary is what you make before taxes.  This is your immediate prospective earnings. You should put the amount per month and the average amount over the past 12 months. Remember to use gross figures (before taxes).  

b.    Overtime --- Any income earned over your assigned duties.

c.     Commissions or bonus income --- Click on this text for my post about bonus income. You will want to be very clear about how your commission scheme works and may want to speak with an attorney to optimize your outcomes.

d.    Public Assistance – This includes social security income.

e.    The remaining questions are self explanatory and specific to each situation – we recommend that you speak with an attorney if your questions are in these categories.

6.    INVESTMENT INCOME: Rental property income is income reduced by expenditures (which includes property taxes, maintenance, and hours managing property). Family Code Section 4508(2). Click on this text for my post on rental income in a divorce. 

7.    INCOME FROM SELF EMPLOYMENT: If this applies to your case, the information can be found on Schedule C of your tax returns. 

8.    ADDITIONAL INCOME: Lottery income, consistent payments from family, and income from Uber are all reportable.

9.    Change in income: If your financial situation has changed, use this section to explain why.

10. DEDUCTIONS: This information is found on your paystub. Many employers have discretionary retirement contributions, such as 401k contributions. Don't include your 401k contributions here, only include mandatory contributions such as a government pension. 

11. ASSETS: This information is found by looking at your bank statements, stock holdings, and real estate.  NOTE: You must fill out Section 11 correctly if you are going to request attorney's fees. 

12. PEOPLE LIVING WITH ME:  Spousal support can be impacted based on who lives with you. For example, if you are the supporting spouse and you have a new dependent, then you may have to pay less in support. The same goes if you are a supported spouse and you do not pay rent because someone else is paying your expenses in your home. That may impact your spousal support amount.

13. AVERAGE MONTHLY EXPENSES:

a.     Mortgage: If you have an adjustable rate mortgage, indicate what you expect the payments will be for the next 6 months. Determine the amount of principal and interest included in the monthly payment – this impacts tax deductions and net spendable income. Make sure you are including property taxes and property insurance. You may need to estimate the reasonable amount for repairs and upkeep (remember to include your gardener, pool service, and housekeeper).

b.    Health care: These are costs that are not paid by insurance. Include here your monthly prescriptions.

c.     Child care:  This includes aftercare, preschool, nanny, summer child care.  

d.    Groceries:  An average family spends $600 a month on groceries.

e.    Eating out: An average family spends $300 a month on eating out.

f.      Utilities: Use your bills to make this entry.

g.    Telephone:  Do not include business related telephone expenses.

h.     The second half of the categories are self explanatory and are not necessarily strategic with the exception of “n” savings and investments. There are some spousal support cases, which establish that the marital standard of living must be calculated by looking at the pattern of saving. The types of expenses that can go in “other” include hair cuts, pet care, memberships.

14.  INSTALLMENT PAYMENTS: Use your loan and credit card statements for this step.

15. ATTORNEY’S FEES: Enter the total amount you have paid thus far to an attorney. You must fill section 11 and 15 out correctly to get attorney's fees. 

If any of the following situations apply to your story, consider speaking with an attorney: (1) you have received gift income, (2) there are non-income producing assets, (3) one spouse is not working but they have a high earning capacity, (4) you or your spouse are able to generate income from investments, (5) there is a great disparity in income such that the other spouse’s lifestyle far exceeds that of yours. 

Contact amanda@gordonfamilylaw.com for more information. 

What is Community Property?

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Often clients are surprised to learn how Community Property rules work in California. I understand the surprise, because some of the rules can be counter intuitive. This post explores some of the basics of Community Property. It is best to consult with a Family Law Attorney if any of these examples sounds familiar because you may have more interest in financial or real property that you first suspect. 

Here are some examples of situations where the result may not be obvious.
First, unless there is a specific contract that states otherwise such as a pre-marital agreement, all income earned by either party during the marriage is Community Property. This means that even if you have a separate bank account for your salary or a 401k with your company, these accounts are community property and should be divided equally upon dissolution.

Second, any real or personal property owned by one spouse “Amy” before the date of the marriage is Amy’s separate property.  However, any funds that are used to enhance the Amy’s property may be considered Community Property at dissolution.  So if Bob and Amy contribute 1 million dollars during marriage to remodel their home, the increase in appraisal value may be community property. 

Third, any property received by one party “Bob” after the date of marriage as a gift, bequest, or inheritance whether from Amy or another person is Bob’s separate property. This means the money given from your great Aunt is not part of the Community. 

Fourth, if Amy has a successful architecture business prior to marriage, the underlying value of that business remains separate.  However,  all increase in value and profits that are attributable to Amy’s efforts are community property.  

If any of these scenarios sound familiar, you should speak to a family lawyer about your case. You can contact me at Amanda@gordonfamilylaw.com for more information.

 

Do I have to file for divorce by June 30th if I want to file Federal Income Taxes as single next year?

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For tax reasons, the June 30th deadline is very important to many clients. Experienced family law attorneys will tell you that under the IRS rules, your marital status on the last day of the year or December 31, 2015 determines your marital status for the entire year. In California, the Court will not issue an official decree of divorce before 6 months from the date of filing and serving of the Petition for dissolution.
Your marital filing status is used in determining what type of return you must file, your standard deduction, and the correct tax. This is important because a change in marital status on your tax documents may impact your standard deduction and other tax benefits.

Also, a change in marital status may impact your tax bracket and the amount of income tax you should have withheld from your pay.

California Family Code 2339 provides that no judgment of dissolution is final for the purpose of terminating the marriage relationship of the parties until six months have expired from the date of service of a copy of summons and petition or the date of appearance of the respondent, whichever occurs first. This means that the earliest a Court can issue a final decree of divorce is six months from filing.

Who claims the child dependent exemption?

If you have children, one important tax issue to determine with your family law attorney is who will take the deductions for a dependent child. This is because the tax implications are important. For each dependent a parent can deduct $3,900 from their federal taxable income. In order to qualify, the child must live with the parent claiming the exemption more than half of the year and be under the age of 19 at the end of the year. Often parents will alternate who gets to claim the exemption from year to year.

If you are able to get a final divorce decree by December 31, 2015 and file as single another benefit may be that one spouse can claim claim Head of Household. This can create bigger tax savings. In order for this status, you and your ex must have lived apart for the last six months and the claiming parent also has to pay more than half of household costs. In this case, the other spouse files his/her return as single.

What about the Mortgage?

Another tax benefit to be aware of is the payment of mortgages. The person who stays in the marital home may be able to take advantage of one of the most popular tax credits which is the mortgage interest deduction. The mortgage interest deduction is the part of your monthly payment that covers the interest you pay on the mortgage.

The last issue to be aware of is property taxes. If both parties have made any estimated property tax payments this year, then you have two options. (1): one party can claim all of the payments or, (2) the payments can be divided between the parties pursuant to an agreement. These payments should be reflected on your tax return.

Tax issues can be complicated, especially when you are changing your filing status from married to single. Consult with a family law attorney and tax professional to make sure you are aware of the risks and benefits associated with changing your tax status.You can contact me at Amanda@gordonfamilylaw.com for more information.

Does getting a divorce have any tax benefits?

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San Francisco Bay Area family law attorneys may tell you about the tax consequences, but are there any benefits?

Yes. You may be able to deduct the legal fees paid for tax advice related to your divorce and you can deduct any legal fees related to spousal support. 

These deductible fees can be claimed only if you itemize deductions on Schedule A (Form 1040). You must claim the fees as miscellaneous itemized deductions subject to the 2%-of-adjusted-gross-income limit. You can contact me at Amanda@gordonfamilylaw.com for more information.