Opinion ID: 2582200
Heading Depth: 3
Heading Rank: 2

Heading: The 2002 Child Support Order and Ovitt's Motion to Modify

Text: In September 2002 the court issued a child support order requiring Byers to pay Ovitt $112.16 per month. The court based its calculation of Byers's income on his DR-305, which showed an adjusted annual income of $11,844. [1] Ovitt moved for a modification of the court's order in December 2003, on the ground that Byers's income was higher than what he had reported. According to Ovitt, Byers had recently purchased a 2001 ... Ford Truck for [$]30,000, and a [n]ew [h]ot tub, and was making substantial payments on his home mortgage. She also claimed that the Alaska Child Support Enforcement Division (CSED) was conducting a [l]ife [s]tyle [i]nvestigation of Byers. Byers filed an opposition to Ovitt's motion, and also sought a reduction in his child support obligations for 2002 and 2003.
In March 2004 Superior Court Master Suzanne Cole held an evidentiary hearing on the two motions. Ovitt, who had submitted the motion to modify pro se, was represented by an attorney; Byers represented himself. [2] Ovitt introduced two vehicle loan applications that Byers had submitted to a credit union. The first application, submitted in November 1999, stated that Byers's monthly income was $6,000. The second, submitted in March 2003, stated that his monthly income was $12,000, and that his monthly mortgage payment was $1,222. Byers testified that the loan applications were inaccurate because he had mistakenly listed his annual income instead of his monthly income, and because he did not read the application before signing it. The superior court master found that the loan applications were extremely vague and unclear, and ruled that Ovitt had not yet shown a change in circumstances that would justify altering the child support order. But the master noted that Byers had not submitted his tax return, and determined that an additional hearing was necessary: Well, the way I see things right now is I do not believe that Ms. Ovitt has met her burden of proof currently; however, I do believe that whether this has been neglected in the past or whether CSED has chosen to investigate this through another route ... I do believe that [Ovitt's attorney] is entitled to review [Byers's] entire tax return, including the Schedule C, to determine whether the deductions claimed for business are appropriate or not for child support purposes. Now I still, even after that, I'm going to have to determine that a significant change of circumstances exists. . . . So it appears to me appropriate that you [Byers] do provide the tax return information as part of discovery, and we'll come back to this issue once that is completed. . . . Although the court required Byers to submit his tax return, it denied a request from Ovitt for discovery of Byers's company records going back to 1999.
At the second hearing, which was held on May 13, 2004, Ovitt called Theodore Sherwin, a certified public accountant, as a witness. Sherwin testified that he had received three separate 2003 federal income tax returns from Byers: a signed return from January 2004, reporting a gross income of $14,369; an unsigned return from March 2004, indicating a gross income of $22,316; and a signed return from April 2004, indicating a gross income of $18,074. The unsigned return was incomplete, as it did not include a form required for the calculation of self-employment taxes, a form explaining a non-cash deduction of $1,300, or a completed partnership form. [3] Byers protested that, because his business was a partnership, he was not required to file certain forms that Sherwin expected, and claimed that he was trying to save the [c]ourt some time with this missing stuff. Sherwin gave an estimate of Byers's 2003 income by adding up his yearly expenses and assuming that Byers's income was at least equal to the total amount spent. For certain expenses, such as utilities, car maintenance, insurance, and credit card payments, Sherwin used estimates. The total of these expenses, and the income that Sherwin attributed to Byers for 2003, was $48,850. Byers disputed Sherwin's estimate, claiming that his company paid half of his $1,245 mortgage payment and eighty percent of his vehicle loan payments and operating expenses. The superior court master directed Byers to provide Sherwin a copy of what was actually filed with the IRS with all attachments, and set a deadline for Ovitt to respond to this in writing. Byers was given a deadline a week after Ovitt's to reply. Master Cole then offered to hold a third hearing if either party found one necessary. She explained in detail how Byers could request such a hearing: The Court: You may respond to [Ovitt's response to the tax return] in writing, whatever you think is necessary or appropriate, and then if you feel that you need to come back to [c]ourt and have a hearing and put on other evidence, you can tell me at that time. You can, depending on what Mr. Sherwin submits. Mr. Byers: Right. The Court: But you need to tell me by June 1st that you want a hearing and why you want a hearing, what you intend to do at the hearing. Mr. Byers: Okay. The Court: Okay? Mr. Byers: All right.
Byers produced a copy of a 2003 tax return, dated May 18, 2004, claiming an adjusted gross income of $15,551. Sherwin then composed a letter analyzing the return, in which he noted that there was no proof about whether the return had been filed, that Byers was attempting to claim as personal deductions expenses that he was already claiming as deductions for his partnership, and that the income Byers attributed to the partnership was inconsistent with the expenses he was claiming the partnership had paid. The letter also pointed out a number of inconsistencies between the May return and the previous three returns, and emphasized that [t]here is no indication in the data supplied how much money was actually paid to Thomas Byers [by the partnership] for 2003. Based on the information provided in the tax return, but excluding any improper accounting for vehicle expenses, supplies ($74,000) and the like, Sherwin provided a possible estimate of Byers's income: Ordinary Income per Form K-1 $25,042 [Simplified Employee Pension] Payment (pending proof of payment) (4,242) 50% of Depreciation taken on Form 1065 (This is a non-cash deduction[)] 4,605 Duplication of home office expenses 8,382 Permanent Fund Dividend 1,108 Net Income Tax Liability for 2003 (2,919) SEP payment to be refunded 631 _______ Total $32,607 Sherwin provided a second estimate, using Byers's expenses as a basis for estimating income: Tax per Form 1040 for 2003 @ 5/18/04 $ 2,919 Allowable SEP paid for 2003 3,611 Personal Household Costs-Mtg. Pmts. 7,470 Utilities 913 20% of Vehicle Expenses 2,131 Child Support 2,652 Personal (Food, hygiene, etc.) Per IRS Guidelines for A[laska] (One person) @ $790 per month 9,480 _______ Total $29,176 The letter emphasized that these figures assume[d] that Mr. Byers's latest testimony, information and the returns he has provided are more correct tha[n] any of the others he has previously provided, and went on to question whether Byers's SEP contributions were deductible for child support purposes. Byers responded with a letter of his own, disputing the figures cited by Sherwin, and claiming that his partnership had recently been audited by the IRS. He attached a letter from the IRS, dated May 6, 2004, stating that it had examined his partnership's tax return and had made no changes. Byers did not request a third hearing.