Opinion ID: 2518798
Heading Depth: 4
Heading Rank: 3

Heading: Disputed items of adjusted annual income

Text: Although the superior court denied Glenn's motion to modify child support on the basis of Marian's new spouse's wealth, it granted his separate motion to modify support because of Gwenn's decision to live in Glenn's home. The court directed the parties to submit proposed child-support calculations reflecting this change. In May 2005, after both parties filed DR-305 child-support worksheets and affidavits, the court issued a modified support order adopting Marian's figures. Glenn challenges three items in the superior court's calculations of the parties' adjusted annual income, all of which the court derived from Marian's worksheets. [24]
Glenn first contends that the superior court underestimated his annual federal tax liability by adopting Marian's figures. Marian's child-support worksheet projected Glenn's 2005 federal income tax liability from the estimated taxes withheld from his January 2005 earnings. This method yielded an annual tax liability of $3,311. By contrast, Glenn's child-support worksheet used the taxes Glenn had actually paid on the similar wages in 2004; this resulted in a projected tax liability of $4,780. Glenn asserts that his withheld taxes underestimated his actual tax liability because he was under-withholding and that the taxes he actually paid in 2004 provide the most accurate basis for estimating his 2005 taxes. Because the record provides no indication that his tax liability would substantially decline in 2005, Glenn reasons that the court should have used his proposed calculations. In support of his argument, Glenn cites Bergstrom v. Lindback. [25] In Bergstrom the superior court used withholding figures instead of actual income tax liability to calculate Bergstrom's adjusted annual income for purposes of determining his child-support obligation. [26] We reversed, ruling that the court should have relied on Bergstrom's history of actual tax payments: The amount of taxes withheld by an employer may or may not reflect a taxpayer's actual tax liability. Although Civil Rule 90.3(a)(1)(A) refers to mandatory deductions for federal income tax, we believe that Bergstrom's actual tax liability under existing Internal Revenue Service regulations, rather than the amount withheld, is the proper basis for determining the amount to be deducted from his income. Therefore, the trial court erred in reducing [Bergstrom's] adjusted annual income by the amount withheld rather than his actual tax liability.[ [27] ] Marian does not dispute the accuracy of Glenn's 2004 tax liability as a predictor of his future liability; instead, she contends that it was not clearly erroneous for the superior court to find that Glenn's paycheck tax withholdings were an acceptable measure of his 2005 tax liability. Marian points to a footnote in Bergstrom in which we described evidence presented at trial indicating that Bergstrom's employer had made an error in calculating the amount of taxes withheld from his wages. [28] Marian suggests that our ruling in Bergstrom hinged on this evidence, and did not establish a general rule disfavoring use of withheld taxes as an acceptable measure of future tax liability. We disagree with Marian's narrow reading of Bergstrom. Our decision in Bergstrom recognized that [t]he amount of taxes withheld by an employer may or may not reflect a taxpayer's actual tax liability. [29] Given the general unreliability of withholding, we declared that actual tax liability under existing Internal Revenue Service regulations, rather than the amount withheld, is the proper basis for determining the amount to be deducted from [Bergstrom's] income. [30] Here, Glenn provided the superior court with his actual tax liability on comparable wages for 2004, along with rate schedules for his income level and taxpayer status. Marian provided no information indicating that Glenn's actual 2004 tax liability would not accurately approximate his current and future tax liabilities. Given these circumstances, we conclude that Bergstrom required Glenn's actual tax liability for 2004 to be used because it was the most accurate available indicator of his actual liability in the future.
Glenn argues next that the superior court undercounted his retirement deduction by disallowing his claimed deductions for contributions to a voluntary retirement plan. In his child-support worksheet, Glenn listed mandatory and voluntary annual contributions totaling $3,927. Marian's worksheets credited Glenn only for a $519 mandatory retirement deduction. Glenn insists that Rule 90.3(a)(1)(B) entitled him to a combination mandatory/voluntary retirement deduction of 7.5% of his gross income. Marian acknowledges that she credited Glenn only for his mandatory contribution. But she insists that this credit was correct under the version of Rule 90.3 in effect when she filed her proposed child-support calculations in April 2005. Marian's argument is accurate in a technical sense but lacks substantive merit. It is true that on April 7, 2005, when Marian filed her proposed child-support worksheets, Rule 90.3(a)(1)(A) provided that voluntary tax-deferred contributions to a qualified retirement or pension plan or account up to 7.5% of the parent's gross income could be deducted if the parent is not a participant in a mandatory retirement plan. [31] This phrasing implied that a parent could not claim credits for both voluntary and mandatory contributions. But in February 2005, this court had issued an order amending the rule to resolve this ambiguity in favor of allowing combined credits. Our order provided that the amended version would take effect on April 15, 2005  eight days after Marian filed her worksheets. [32] Because the amended rule was in effect when the superior court issued its May 1, 2005, order modifying the parties' support, the amended rule allowing a combined deduction applied to this case.
Glenn last contends that the superior court overestimated Marian's income-tax liabilities. In her worksheets, Marian assigned herself a tax liability of $6,260 on her imputed income of $52,700. This $6,260 hypothetical liability was identical to the figure agreed upon by the parties and approved by the court in 2002 when it issued the original child-support order. Glenn's 2005 child-support worksheets proposed to assign Marian a lower tax liability, $4,556, a figure Glenn calculated using 2005 IRS tax tables. Glenn argues that this updated calculation is more accurate and thus should have been used instead of the original hypothetical figure, which, in his view, had no factual basis. In response, Marian points out that all of the original figures used in connection with her imputed potential income were necessarily hypothetical; because Glenn agreed with this hypothetical tax liability in 2001 and urged the court to adopt it, she contends, it is too late for him to change the figure now. But Marian's argument places form over substance. In effect, it proposes to establish a rule that would lock all future tax consequences of imputed potential income to consequences existing at the time of original imputation. Such a rule would conflict with basic principles of fairness requiring tax-support calculations to be as accurate as reasonably possible. Marian does not dispute that calculating her tax liabilities using the tax provisions applicable in 2002 produces an outdated result. Yet she identifies no sound reason why the outdated information should be acceptable in the modified order if it would not have been in the original order. We thus conclude that Marian's ongoing tax liability must be calculated using currently applicable tax tables.