How to Calculate the Child Support Obligation of a Self-Employed Parent

While determining child support may appear to be rather straight-forward, challenges often arise when one spouse tries to disguise what their true earnings are when they receive benefits other than just a regular paycheck. If you have a self-employed spouse, not only might you consider retaining the services of a forensic accountant, but insist that your attorney does a thorough job with discovery in an effort to arrive at a fair and equitable support order.

As an example, here are five ways that income can pass "under the radar":

1. Your spouse may set-up a "straw" employee such that money is paid to a non-existent employee. It is not uncommon for such checks to be voided after the divorce or modification matter is resolved. Our attorneys often take the deposition of the payroll supervisor in order to lock in their story.

2. In order to show high expenses, and low(er) profits, your spouse may show money paid from the business to someone close - such as a father, mother, girlfriend or boyfriend - for services never rendered. In such cases, the money is returned to the party after the divorce is final.

3. Some spouses delay in signing long-term business contracts until after the contested divorce or modification matter goes to judgment. Although this may appear to be smart planning, the intent is to lower the value of the support order. As such, this practice is considered hiding assets and income and looked down upon by the court.

4. In some cases, the expenses listed on a spouse's financial statement are considerably higher than the reported income would support. In this case, the court would welcome a detailed analysis of personal lifestyle, spending patterns and cash flow in order to assist the judge in arriving at an equitable support obligation. Think about it: there are all aspects of compensation to determine actual income including travel, meal and auto allowances; bonuses; retirement contributions; commissions; insurance and payment of personal expenses, etc.

5. If your spouse is in a business or industry where there is considerable variation in income due to seasonal employment, overtime, second jobs, bonuses, or profit sharing, etc. you're well-advised to taking a two- or three-year average over a consistent period when such variation exists.

If you find yourself confused about how to address the issue of support with a self-employed spouse, contact us for no-obligation at (800) 910-DIVORCE.