Child support modification discovery requests (pro se)

[criticalthinker]

Child support modification discovery requests (pro se in NH)

What is the name of your state (only U.S. law)? NH

Mid-2006 divorce. I filed a CS modification form earlier this year. The hearing is scheduled for this Fall. My intent is to have support reduced to a level appropriate for my reduced income of the past several months and foreseeable future.

I recently received a handwritten letter from my ex requesting detailed business (LLC, of which I am a member) and personal bank statements for the past 4 years in addition to IRS tax filings. And her letter included what appeared to be a 30-day deadline - I assume it's a discovery letter of some sort. I received it via regular mail direct from my ex.

Both of us are already required by law to report any changes in earnings to the Court, and we are required to submit financial affidavits with our most recent tax filings as part of the CS modification process.

Am I also now required to respond to my ex's request? Specifically, do I have to provide her with 4 years worth of statements and tax forms for a CS modification that I initiated? Note: she should still have copies of 2 years of statements and tax filings from the original divorce proceedings unless she lost them. Can I make the same request of her?

I'm pretty sure NH Courts review only the last 6-12 months of income to establish a level of income and calculate CS. I'm at a loss as to why she'd feel that she needs 4 years worth of statements, two years of which she (and her attorney at the time) had already received copies of in 2006. She has yet to respond to requests about it.

I should mention that she was never given copies of the LLC bank statements (nor did her attorney request them) during the divorce. I can only assume such documentation was not relevant to the case, otherwise a competent attorney would have requested it. Is her request to see the LLC's bank statements, for the purposes of a CS modification hearing, a legally defensible request? I assume I'd have to get permission before I could even provide such documentation. Aren't copies of the Schedule K tax filings sufficient to establish income?

 

[Betsyalene]

Don't give her anything

Hello -

I am in GA so I don't know how much this will apply but my husband just recently had his child support modified because he is recently laid off. We sent a recovery request to his child's mother three times. Once regular certified mail, then we served her, then we had another lawyer send it to her regular mail. She never responded to any of these requests. When we went to court we had a lawyer and she did not. This time around she wasn't able to ask for all the things she had previously like him paying all insurance co-pays and premiums, him paying for daycare and summer camp. Because she had no proof of these expenses they were not computed into the child support worksheet.
I saw all of that to say this, do not respond to her request. Unless it comes directly from the lawyer compelling you to release those documents than you can ignore that letter from her. She is just trying to scare you. Hope this helps.

 

[TheGeekess]

Hello -

I am in GA so I don't know how much this will apply

None of it applies. You have not helped OP at all. Family law is different in every state; they all have their own rules/statutes/codes. Shall I advise you as if you were in Alabama which would more than likely not help you? Didn't think so....

OP: Please do not follow this advice from Betsyalene. She is a GnuBee and does not know the rules of the road/how things work in your state nor does it seem that she has the gumption to do some research about your state to give you a proper legal answer. Please wait for another senior to post the proper advice to your question.

 

[LdiJ]

What is the name of your state (only U.S. law)? NH

Mid-2006 divorce. I filed a CS modification form earlier this year. The hearing is scheduled for this Fall. My intent is to have support reduced to a level appropriate for my reduced income of the past several months and foreseeable future.

I recently received a handwritten letter from my ex requesting detailed business (LLC, of which I am a member) and personal bank statements for the past 4 years in addition to IRS tax filings. And her letter included what appeared to be a 30-day deadline - I assume it's a discovery letter of some sort. I received it via regular mail direct from my ex.

Both of us are already required by law to report any changes in earnings to the Court, and we are required to submit financial affidavits with our most recent tax filings as part of the CS modification process.

Am I also now required to respond to my ex's request? Specifically, do I have to provide her with 4 years worth of statements and tax forms for a CS modification that I initiated? Note: she should still have copies of 2 years of statements and tax filings from the original divorce proceedings unless she lost them. Can I make the same request of her?

I'm pretty sure NH Courts review only the last 6-12 months of income to establish a level of income and calculate CS. I'm at a loss as to why she'd feel that she needs 4 years worth of statements, two years of which she (and her attorney at the time) had already received copies of in 2006. She has yet to respond to requests about it.

I should mention that she was never given copies of the LLC bank statements (nor did her attorney request them) during the divorce. I can only assume such documentation was not relevant to the case, otherwise a competent attorney would have requested it. Is her request to see the LLC's bank statements, for the purposes of a CS modification hearing, a legally defensible request? I assume I'd have to get permission before I could even provide such documentation. Aren't copies of the Schedule K tax filings sufficient to establish income?

When you are self employed, its quite appropriate for the other side to ask for detailed financial information going back several years. Yes, its a legally defensible request. People who are self employed have the ability to manipulate their official earnings for both tax and CS purposes.

You want your child support reduced. You should be willing to provide the financial information that proves that you are not cooking any books to make that happen. (I am not suggesting that you are doing so)

 

[criticalthinker]

I appreciate your comment LdiJ, thank you.

I should mention, however, that an LLC like its S Corp and C Corp siblings, is issued a Federal Tax ID with which to do business, W-9s for each client relationship, purchase orders to fulfill contracts, and annual 1099s based on earnings. Members of an LLC are no more or less capable of "cooking their books" than any other corporate executive. Would any other corporation (S or C) be required to hand over what is essentially the content of its books for the private child support case of one of its employees? I'm going to guess that the answer is usually no - 1040s and pay stubs would suffice.

If the business was a DBA (doing business as) or sole proprietorship operating on a cash-basis - quite literally off-the-books - then I could understand the desire for financial forensics. An unincorporated, self-employed landscaper could very well hide income with relatively little effort.

I do need the support to be reduced for the time being, and I expect I should have no problem achieving that goal. The Schedules K and C and 1099s and personal bank statements more than adequately reflect my current income. The LLC's bank statements are IMO not relevant to the case (the income passes through to its members, and transactions on the account are those of multiple members, not mine alone). It seems as if I'm being treated differently than a typical executive employee. I see no reason to provide documentation that's not relevant to the case unless it is required by law. The effort and expense required to trace, authenticate and document each of the account transactions, over several years, across all members and managers of the corporation, is not trivial and certainly not achievable in 30 days. And, two of the members aren't with the company any longer.

The net-net of your response, however, answered one of my questions. It is within her rights to request financial information going back several years. Unfortunately, that does not tell me if she has a right to request the books of a corporate entity.

Regarding my personal documentation, do I have to provide that documentation a second time (i.e., for the years which she had already received during the divorce proceeding)? Or, can I simply respond with the new documentation that she has not yet received?

 

[CourtClerk]

I appreciate your comment LdiJ, thank you.

I should mention, however, that an LLC like its S Corp and C Corp siblings, is issued a Federal Tax ID with which to do business, ?

Maybe I should mention that LdiJ is a tax professional... she knows what she speaks.

 

[LdiJ]

I appreciate your comment LdiJ, thank you.

I should mention, however, that an LLC like its S Corp and C Corp siblings, is issued a Federal Tax ID with which to do business, W-9s for each client relationship, purchase orders to fulfill contracts, and annual 1099s based on earnings. Members of an LLC are no more or less capable of "cooking their books" than any other corporate executive. Would any other corporation (S or C) be required to hand over what is essentially the content of its books for the private child support case of one of its employees? I'm going to guess that the answer is usually no - 1040s and pay stubs would suffice.

I know all of this because I am an accountant and a tax professional.

If the business was a DBA (doing business as) or sole proprietorship operating on a cash-basis - quite literally off-the-books - then I could understand the desire for financial forensics. An unincorporated, self-employed landscaper could very well hide income with relatively little effort.

And so can those who are members of a closely held LLC...or S-corp for that matter. Please don't try to kid a professional.

I do need the support to be reduced for the time being, and I expect I should have no problem achieving that goal. The Schedules K and C and 1099s and personal bank statements more than adequately reflect my current income. The LLC's bank statements are IMO not relevant to the case (the income passes through to its members, and transactions on the account are those of multiple members, not mine alone). It seems as if I'm being treated differently than a typical executive employee. I see no reason to provide documentation that's not relevant to the case unless it is required by law. The effort and expense required to trace, authenticate and document each of the account transactions, over several years, across all members and managers of the corporation, is not trivial and certainly not achievable in 30 days. And, two of the members aren't with the company any longer.

You are being asked to produce the company financial statements and bank statements. There is nothing onerous about that. It shouldn't take one day to pull together, let alone 30.

The net-net of your response, however, answered one of my questions. It is within her rights to request financial information going back several years. Unfortunately, that does not tell me if she has a right to request the books of a corporate entity.

Tell me how many members the LLC has and what relationship you have to those members (long term friends, family members, casual acquaintences etc.) and I will tell you how much chance you have of getting out of providing that information.

Regarding my personal documentation, do I have to provide that documentation a second time (i.e., for the years which she had already received during the divorce proceeding)? Or, can I simply respond with the new documentation that she has not yet received?

Yes, you should provide it again.

 

[criticalthinker]

Thank you LdiJ. Once again, I appreciate it.

I'm glad you're a tax pro. Now that I know your occupation I can skip the obvious. Fortunately, I do not manage the books - we've been outsourcing bookkeeping and accounting to the same independent contractors for several years now.

I'm definitely aware that companies can and do find ways to manipulate income. That's precisely why I wrote that LLC members "are no more or less capable of cooking their books". It's not to say they cannot or do not do so. Even C Corps have demonstrated that, with accounting, anything is possible.

We have three members (2 new within the past 2 years), and two former members. No family and no relationships (between members) longer than a couple years prior to joining. One former member was disassociated, and the other later left to work for a competitor.

Gathering the documentation isn't the problem. I agree that a day or two would be plenty of time. However, once you have the documentation how would you know, for example, which member initiated a transaction when most of the transactions were completed through bookkeeping (which happens to have check signing authority, signature stamps, and bank account access)? Short of sitting down for days with the group of five members to determine who authorized what, transaction by transaction, I fail to see the value of such information.

In the absence of that level of cooperation from current and former members, it becomes a game of he said she said and the Court would not be amused. If my ex wants to question even 5% of the company transactions of the past 4 years, that could put an enormous burden on the group, and at whose expense? If the effort is at her expense, we'd be more than happy to take the time to sort things out.

What confuses me most is that she is not working with an attorney or tax professional. We're both pro se for this hearing. I'm not sure what she thinks she's going to find. We've never had anything to hide. I don't want this to turn into an expensive, unjustifiable witch hunt.

 

[LdiJ]

Thank you LdiJ. Once again, I appreciate it.

I'm glad you're a tax pro. Now that I know your occupation I can skip the obvious. Fortunately, I do not manage the books - we've been outsourcing bookkeeping and accounting to the same independent contractors for several years now.

I'm definitely aware that companies can and do find ways to manipulate income. That's precisely why I wrote that LLC members "are no more or less capable of cooking their books". It's not to say they cannot or do not do so. Even C Corps have demonstrated that, with accounting, anything is possible.

We have three members (2 new within the past 2 years), and two former members. No family and no relationships (between members) longer than a couple years prior to joining. One former member was disassociated, and the other later left to work for a competitor.

Gathering the documentation isn't the problem. I agree that a day or two would be plenty of time. However, once you have the documentation how would you know, for example, which member initiated a transaction when most of the transactions were completed through bookkeeping (which happens to have check signing authority, signature stamps, and bank account access)? Short of sitting down for days with the group of five members to determine who authorized what, transaction by transaction, I fail to see the value of such information.

In the absence of that level of cooperation from current and former members, it becomes a game of he said she said and the Court would not be amused. If my ex wants to question even 5% of the company transactions of the past 4 years, that could put an enormous burden on the group, and at whose expense? If the effort is at her expense, we'd be more than happy to take the time to sort things out.

What confuses me most is that she is not working with an attorney or tax professional. We're both pro se for this hearing. I'm not sure what she thinks she's going to find. We've never had anything to hide. I don't want this to turn into an expensive, unjustifiable witch hunt.

The court won't care what member initiated what bookkeeping transaction. What the court will care about is that the overall records of the company backed up the K1s received by the members...and that distributions to the members make sense based on the K1s.

For example, if the company books show 50k of distibutions to you, but your K1 shows only a member share of 30k in profits there is going to be an issue.

However, if the previous year showed a member profit of 50k but distributions of only 30k, then it might wash.

You are a small member LLC, if the court gets involved in discovery you will need to present the records. However the records you will be required to produce may only be the records that show your distributions compared to your K1.

 

[criticalthinker]

I understand now, thank you.

I incorrectly thought, because of what happened during the divorce proceeding, this would just be more of the same line of questioning. I was questioned by my ex's attorney about a couple dozen transactions on personal bank statements spanning more than two years. Nothing came of it, but I recall the difficulty of remembering the specifics of each and every transaction - no matter how small - dating back a couple years.

If it's just what you describe, compliance will be easy. But wouldn't a simple set of Quickbooks reports (e.g., P&L and such) or the actual Quickbooks database be more informative and practical than 48 months' worth of bank statements? That's what the attorneys on both sides used during our brief legal dispute with a disassociated member a couple years ago when we received a clean bill of health. Perhaps she doesn't realize what she's asking for. And, perhaps I should supply only the information she requested and not even bother mentioning the Quickbooks documents.

If she does raise questions about individual transactions on the corporate bank statements - for example, asking who received a payment of $X dollars on date Z and why? - is any of that sort of information relevant to the hearing? She may, naively or not, believe she can do what her attorney did a couple years ago when he unsuccessfully nitpicked my personal statement. Can I object to such questions about the corporate bank statements on any legal grounds? I'm not going to have with me, in court, supporting evidence for every single transaction we've ever done as a company in our several year long history.

 

[LdiJ]

I understand now, thank you.

I incorrectly thought, because of what happened during the divorce proceeding, this would just be more of the same line of questioning. I was questioned by my ex's attorney about a couple dozen transactions on personal bank statements spanning more than two years. Nothing came of it, but I recall the difficulty of remembering the specifics of each and every transaction - no matter how small - dating back a couple years.

If it's just what you describe, compliance will be easy. But wouldn't a simple set of Quickbooks reports (e.g., P&L and such) or the actual Quickbooks database be more informative and practical than 48 months' worth of bank statements? That's what the attorneys on both sides used during our brief legal dispute with a disassociated member a couple years ago when we received a clean bill of health. Perhaps she doesn't realize what she's asking for. And, perhaps I should supply only the information she requested and not even bother mentioning the Quickbooks documents.

If she does raise questions about individual transactions on the corporate bank statements - for example, asking who received a payment of $X dollars on date Z and why? - is any of that sort of information relevant to the hearing? She may, naively or not, believe she can do what her attorney did a couple years ago when he unsuccessfully nitpicked my personal statement. Can I object to such questions about the corporate bank statements on any legal grounds? I'm not going to have with me, in court, supporting evidence for every single transaction we've ever done as a company in our several year long history.

Provide the P&L, the Balance sheet, the bank statements and anything that shows distributions to you (maybe the detail of just that general ledger account) along with a copy of your K1 for each year.

Review the documentation yourself to make sure that it makes sense in relationship to your K1.

Again, if things are properly investigated they are going to want to make sure that the company financials make sense compared to the K1s, that distributions make sense compared to the K1s, and that member benefits/expense reimbursements make sense as well.

 

[haiku]

I agree with LDiJ but the last time we returned to court as a ONE owner LLC, we were told that NH only requires the current and past years records.

You don't want to put anything before the judge he doesn't need and will question.