I reside in Michigan, my husband and I divorced 6 years ago, since then he has taken me to court a surplus of times to try to ruin me with lawyer fees. I was awared 50% of the 401k in the settlement. Since then I have had to withdrawl fund to live off of and pay all the fees associated with the many court trips. He know is trying to take me to court to purpose the 401k withdrawls as income to reduce child support payment and make me pay back any overages. Can anyone advise on this?
It seems very unlikely that they can be called income since they were already yours. While you have to pay taxes and report them as income, child support is calculated based on net salary which is before 401k is withdrawn.
Its the same effect as if you had an automatic deduction into a savings account. You wouldn't compute a withdrawal from that as income.
Basically it is only income as far as the IRS is concerned and then only because of the special class of funds.
It seems very unlikely that they can be called income since they were already yours. While you have to pay taxes and report them as income, child support is calculated based on net salary which is before 401k is withdrawn.
Its the same effect as if you had an automatic deduction into a savings account. You wouldn't compute a withdrawal from that as income.
Basically it is only income as far as the IRS is concerned and then only because of the special class of funds.
His claim is baseless.
I have to disagree on this one. I believe it depends on the state where the order is passed. The 401k withdrawls if thats what they really are would be subject to income tax therefore also subject to income. 401k money is suppose to be set aside and not spent until a later time in life. Thats why there are penalties on it. It may very well be counted as income on a suplemental level. About the same as you would treat a bonus from a regular job.
If the parent paying support were to have 17% taken from his check, it would be before the 401k were taken out... so why wouldnt it work the other way?
Whether or not the 401K is considered income to you is immaterial as far as child support to you for your child(ren) is concerned. An increase in your income, if you want to call the 401K withdrawals "income", does not reduce his child support obligation. His child support obligation can only be lowered by the court if he can demonstrate a change in his circumstances, such as a decrease in his income due to factors beyond his control or if he were to have another child.
Whether or not the 401K is considered income to you is immaterial as far as child support to you for your child(ren) is concerned. An increase in your income, if you want to call the 401K withdrawals "income", does not reduce his child support obligation. His child support obligation can only be lowered by the court if he can demonstrate a change in his circumstances, such as a decrease in his income due to factors beyond his control or if he were to have another child.
That varies by state. Some states account for the custodial parents income when figuring support.
That varies by state. Some states account for the custodial parents income when figuring support.
Technically that's the way it is in my great state of NJ! However, the guidelines are worded such that, when you crunch the numbers, the non-custodial parent's amount to be paid will essentially stay the same based on his income, regardless of what dollar amount of income is imputed to the custodial parent.
Here is an example as quoted from Minnesota child support guidelines. It also includes " pension " income which the 401k could be considered as.
Gross monthly income
The guidelines are based on gross monthly income, including:
• salary and wages
• commissions
• spousal maintenance
• potential income
• workers’ compensation
• unemployment insurance
• annuity payments
• military and naval retirement
• pension and disability payments
• Social Security benefits received by a parent based on the parent’s own eligibility
• Social Security benefits paid for a joint child based on a parent’s eligibility
• income from self-employment or operation of a business
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