My friends at Crawford Ellenbogen LLC  know a lot about taxes. One of their principals, Victor Dozzi CPA, recently sent me a great tip about kids who are earning income from summer jobs, and I asked him if I could share it with you. He agreed, so here it is:

Are your children working at summer jobs this year?  If so, here are some tax reminders.

* If a child did not owe any income tax last year and doesn’t expect to owe any this year, the child can claim “exempt” when completing the federal withholding allowance form (Form W-4). This will eliminate having federal income tax withheld from his or her paychecks.

* For 2010, your child can earn as much as $5,700 without owing federal income tax. There will still be withholding from your child’s paycheck for a number of other taxes, including: social security, Medicare, PA, PA UC & perhaps local.

* As long as you provide more than half of your child’s support, you can still claim the child as an exemption on your 2010 tax return.

* Earnings from a summer job will qualify a child to contribute to an IRA – up to $5,000 or the child’s 2010 earnings, whichever is less. If your child would rather spend his earnings than save for retirement, you could gift all the cash, or agree to match what your child saves. As long as the amount put into the IRA doesn’t exceed the child’s wages (or the $5,000 limit), it doesn’t matter where the cash comes from.

The principals of Crawford Ellenbogen (Joan, Victor, and Barb) can provide great advice and personalized service – it’s just a phone call away.

Department of the Treasury Required Disclosure

In accordance with IRS’ Circular 230 we are required to advise you that any written advice we provide to you cannot be used for the purpose of avoiding penalties under the Internal Revenue Code.

An article in the ABA Journal this month focuses attention on the growing problem of international child support and custody disputes. With the advent of global travel and internet relationships, more and more parents are facing the challenge of enforcing child support and custody orders across national boundaries. Some parents describe experiences that sound like scenes from a James Bond movie, as their children have been abducted around the globe. International treaties have been helpful but are very limited in their ability to bring an end to such practices.  The Hague Convention on Civil Aspects of International Child Abduction provides a mechanism to enforce custody orders and allocate jurisdiction in custody disputes, but only 82 nations have ratified the treaty. China, Japan and India are examples of major countries who have not ratified the custody treaty.

An international child support treaty (The Hague Convention on the International Recovery of Child Support) was drafted in 2007. It has been signed by only one country, the United States, and even our Senate has not ratified the treaty. Child support enforcement remains a difficult problem for parents who exes have retreated to foreign lands. The ABA article cites the U.S. Supreme Court’s recent decision in Abbott as a hopeful sign that our courts will enforce these international treaties, but we cannot always expect reciprocal action abroad. This is one reason why child support agreements can be useful. A contract between parents may not be strictly enforced everywhere in the world, but it can be the “foot in the doorjamb” that makes a difference.

Yesterday, I posted a summary of Abbott v. Abbott, 530 U.S. ___ (May 17, 2010), in which the U.S. Supreme Court held that a Chilean non-relocation order was a “right of custody” under the Hague Convention, requiring the Texas court to return a child to Chile after the mother relocated to Texas without permission. The Abbott decision was an opinion of the majority, including six of the nine Justices. Only Justice Stevens dissented, with Thomas and Breyer, JJ, joining him. This post will look at the dissenting opinion.

In his dissent, Justice Stevens described the difference between “rights of custody” and “rights of access” under the Hague Convention. If a parent’s “rights of custody” are violated, the courts must return the child to the jurisdiction that granted those custody rights. On the other hand, if a parent’s “rights of access” are violated, there is no duty to return the child. Justice Stevens argued that under Chilean law, the father in this case did not have what we would call “joint legal custody”; that is, the right to participate in major decisions concerning the child’s health, education, upbringing and religious training. The non-relocation order was merely a restriction on the mother’s custody rights, not “rights of custody” that would justify the more stringent remedy under the Hague Convention. Since the father did not have any rights or responsibilities to provide for the child’s care, the Justice argued, he should not have been able to interfere so deeply with the mother’s custody rights.

The U.S. Supreme Court issued a ruling on Monday in an international custody case governed by the Hague Convention on the Civil Aspects of  International Child Abduction. In Abbott v. Abbott, 560 U.S. ___ (May 17, 2010), the mother and father of a child who was born in the United States moved to Chile. When the parents separated, a Chilean court awarded primary custody to the mother and visitation to the father. Under Chilean law, a visitation order includes the right to prohibit the mother from taking the child out of Chile without the permission of the court or the father. The mother took the child to Texas without permission, prompting the father to sue in federal court under the Hague Convention. The Texas court held that it did not have jurisdiction under the Hague Convention because the father had no “rights of custody” under the Chilean court orders. The Fifth Circuit affirmed.

On appeal, the U.S. Supreme Court reversed, holding that the father’s right to prevent the mother from taking the child out of Chile amounted to “rights of custody” under the Hague Convention. In other words, the father’s right to deny relocation, which was implicit in the Chilean court’s visitiation order, was sufficient to invoke the protections of the Hague Convention.

The Hague Convention contains a definition of “rights of custody” which includes the right to determine a child’s place of residence. An order or law that prohibits a parent from removing the child from the court’s jurisdiction imposes a duty on a parent that is a right in the other parent. This right to veto the departure of a child is a “right of custody” under the Hague Convention. This Supreme Court decision overturned decisions made in the Fifth Circuit, Second Circuit, Fourth Circuit and Ninth Circuit.

The Jon and Kate divorce provided another example this week of what to do – and what not to do – in divorce situations. The Gosselins were ordered this week to attend mandatory co-parenting classes in Berks County.  Allegheny County and most surrounding counties in Western Pennsylvania have a similar program. In Allegheny County, it is known as the “Generations” program.

The Generations program, part of the Child Custody Department, is a mandatory two-part process for individuals involved in a custody dispute. This alternative dispute resolution program includes an educational seminar for adults, an interactive group for children ages six through fifteen, and a mediation orientation session.

The adult education seminar of the Generations program is approximately three hours in length and offers parents/caregivers the skills to reach their own resolution on custody issues. The following topics are addressed:

• How to build a co-parenting relationship
• How to communicate and problem-solve
• How to help children cope effectively with their changing family
• Identify how parent/caregiver conflict can affect the behavior of children
• Understand that most children do best when they have the opportunity to know and love both parents
• General overview of the mediation session

The children’s group serves children between the ages of six and fifteen years old. Children are appropriately grouped by age so that they can identify and share with peers similar experiences in their families. These groups are facilitated with activities, discussions, art, music and play.

Later in the week, after being ordered to attend parenting classes, Jon Gosselin was spotted in a mall bookstore, reviewing a copy of Kate Gosselin’s latest book, “I Just Want You to Know: Letters to My Kids on Love, Faith and Family.” Perhaps he was looking for dirt to use against Kate in the mediation.

I generally advise clients not to go to the Generations mediation with a chip on their shoulders. It is really not productive to enter mediation with a laundry list of “wrongs” perpetrated by the other parent. It does not impress the mediator. Remember that even if the other parent confesses to a murder during the mediation, the mediator cannot be called to testify. Concentrate instead on telling the mediator what custody arrangements you want, focusing on how your plan will benefit the children. If you keep your focus on the kids and why your proposal is best for them, you are much more likely to get good results.

A decision issued two weeks ago makes South Carolina the latest state to overturn its laws granting child support to college students. In Webb v. Sowell (April 19, 2010), the South Carolina Supreme Court held that the law could not treat separated or divorced parents differently than married parents, who have no legal obligation to pay their children’s college tuition. Such laws, it held, violate the equal protection clause of the federal and state constitutions, and no rational basis exists for treating divorced or separated parents differently. This decision, from which two justices dissented, struck down more than thirty years of law in South Carolina.

Nearly twenty years ago, the Pennsylvania Supreme Court reached a similar conclusion in Blue v. Blue, 432 Pa. 521, 616 A.2d 628 (1992). Interestingly, the Pennsylvania Supreme Court had never touched the issue before Blue, even though trial and appellate courts had been awarding college support in Pennsylvania since 1963. South Carolina’s top court, on the other hand, had granted college support in 1979, reversing itself this year.

Legislative efforts in Pennsylvania following Blue resulted in a statute granting college support to the children of separated and divorced parents. The Pennsylvania Legislature made findings that the children of separated and divorced parents have special needs and circumstances which justify a different treatment than the children of intact families. The Pennsylvania Supreme Court disagreed, striking down the law in Curtis vs. Kline, 542 Pa. 249, 666 A.2d 265 (1995). The law remains on the books but has no legal effect due to the Curtis decision.

For each of the past four years, I have been privileged to teach lawyers about the latest developments in child support as one of the hosts of Family Law Update, a satellite broadcast presentation sponsored by the Pennsyvlania Bar Institute. Since I joined the panel in 2005, several important decisions have influenced the direction of Pennsylvania child support law. Here is my summary of the six most important cases (and one change in the law itself) since 2005:

#6 – Reinert v. Reinert, 926 A.2d 539 (Pa.Super.2007). The Superior Court in this case affirmed the continuing viability of the “nurturing parent doctrine,” a policy in which the courts may excuse the mother of a young child from working to contribute toward the support of the child. Prior to this decision, it was established that a mother may refrain from working even to raise the child of a subsequent relationship. Yet, in Reinert, the Superior Court took the policy to its extreme. The Court terminated the support obligation of a mother who did not have custody of her eldest child when she gave birth to twins by a subsequent relationship and elected to stay at home to raise them.

#5 – Murphy v. McDermott, 2009 WL 2365992 (2009). The question of whether a parent must pay private school tuition may be raised in child support proceedings, but it is also a legal custody issue. The problem is: the legal standards to answer that question are different in support and custody proceedings. The Murphy case demonstrates how important “status quo” can be, compelling a parent to pay tuition even if he or she objected at the time when the child was enrolled in private or parochial school. The lesson: parents must get involved in the choice of schooling before the question of paying comes up.

#4 – Berry v. Berry, 2006 Pa.Super. 98 (2006). When child support becomes an issue between divorcing parents, the courts must decide whether certain income sources – such as pensions, rental properties and businesses – should be considered as marital property or income for support purposes. Generally, they cannot be both. In Berry, the Superior Court held that severance pay would be counted as marital property if acquired before separation or income if acquired after separation.

#3 – Estate of Johnson, 970 A.2d 433 (Pa.Super.2009). While this decision might be limited to its unique factual circumstances, the Superior Court certainly affected settlement practice by holding the estate of a deceased parent responsible for the payment of child support. The deceased parent had entered into a marital settlement agreement with his ex-wife, promising to pay child support until the youngest child was 18 years of age. The agreement did not specify whether the obligation would terminate upon the death of a parent, so the court held that it did not. The estate ended up owing nothing, however, because the Social Security derivative benefits received by the child as a result of the parent’s death satisfied the child support obligation. This case has prompted many lawyers to specify death as cause for terminating child support in their agreements, and has also motivated support recipients to demand life insurance as a security device.

#2 – Krebs v. Krebs, 944 A.2d 487 (Pa.Super.2008). The Superior Court fortified its prior admonitions warning support payors to report increases in their income. In cases where a payor fails to report an increase, even an increase not precipitated by a job promotion or change in employers, the court may increase child support retroactively to the date when the income increase occurred, even years later. The Superior Court in Krebs granted such a retroactive increase in child support even after the custodial parent

#1 – The 2010 Amendments to the Pennsylvania Child Support Guidelines. The 2010 amendments eliminated the Melzer formula, which was a budget-based method of calculating child support in high-income cases. The uppermost limits of the child support guidelines have been extended to $30,000 per month combined net income, and an income-based formula has been promulgated to calculate child support in high-income cases.

Parents who are paying or receiving child support under the Melzer formula for high-income cases (where the parents’ combined net incomes is over $20,000 per month) should contact their lawyers immediately. The new Pennsylvania child support guidelines (which eliminated the Melzer formula, effective May 1, 2010) will almost certainly result in a child support decrease for most of those high-income cases. Rather than considering the custodial parent’s household budget to determine the proper amount of child support, the new guidelines are income-based at all income levels. The child support guidelines chart has been extended upward to $30,000 per month combined net income. For cases where the parents’ combined income is greater than $30,000 per month, the new guidelines start with a base amount and adds a percentage of the parents’ combined income over $30,000 per month.

So, if nothing but the guidelines have changed, can a parent file a petition for modification? Yes, probably. A new Guideline amount resulting from new or revised support guidelines may constitute a material and substantial change in circumstances.  Pa.R.C.P. 1910.19(a).

Parents whose combined net income is less than $20,000 per month might have grounds for modification if the amount of child support under the new guidelines is materially different from the current support order. At some income levels, the amount of child support has increased. At other income levels, it has decreased. Parents are urged to contact their lawyers to find out whether they are entitled to modification.

For months now we have been telling our clients that a change in the child support guidelines was imminent. On January 12, 2010, our predictions were realized: the Pennsylvania Supreme Court Domestic Relations Rules Committee enacated new child support guidelines, effective May 12, 2010.

The amount of child support was revised at all income levels. Some child support guidelines increased while others decreased. The most significant change in the guidelines was the elimination of the Melzer formula, applicable only to high-income cases.

Prior to the 2010 guideline revision, high-income cases were treated differently than ordinary cases. In cases where the parents’ combined net income exceeded $20,000 per month, the chart of child support figures did not apply. Instead, parents were required to submit budgets of their monthly expenditures for the children, which were allocated between them in proportion to their available net income after paying their own living expenses. This budget-based formula for determining child support in high-income cases was totally different from the income-driven formula for ordinary cases. That distinction has been eliminated in the 2010 revisions.

The child support guidelines have been extended upward to $30,000 per month combined net income. They were formerly limited to $20,000 per month combined net income. As mentioned above, the amount of child support has been revised at all income levels, sometimes upward, sometimes downward.

The amended Rules also overruled the Isralsky decision, which held that the mortgage subsidy under Rule 1910.16-6(e) might apply in cases where a custodial parent lived in the former marital residence after the divorce.

Further details will be posted in this space. Come back soon!

The winter holidays can be fun and relaxing, but at times they can also be stressful or disappointing. The downside of the holiday season is a special challenge for families who are experiencing divorce or separation. Here are a few tips to cope with the holiday season:

1. Keep your expectations realistic. People who are separated or divorced may have limited budgets for gifts, extravagant meals, or elaborate holiday decorations. Plan for a smaller, more intimate celebration with your most trusted friends and family – which can be even more meaningful than blowout parties and expensive gifts.

2.  Consider charitable endeavors. Thanksgiving is a great opportunity to donate time or supplies to food banks, homeless shelters, and charitable organizations. The satisfaction that you will receive from giving to others will make it a memorable holiday season for those who receive and those who give.

3. Don’t turn away help from others. Sometimes we deny our our needs because we don’t want to impose on others. But when friends and family extend holiday invitations or ask if we need help, it may be a good time to renew our bonds with those friends or family members. Let others help you when they can.

4. Keep a positive attitude with the kids. A holiday divided between two parents can be stressful for kids. Don’t compound their stress by saying anything bad about the other parent. Even veiled comments are easily perceived by children. Instead, focus on the positive: perhaps two turkey dinners, or seeing both extended families. Kids will appreciate your good humor and feel much better about themselves and their family.