According to the latest U.S. Census Bureau report, 14.6 million Americans, or one-tenth of the nation’s workforce, identifies as self-employed. With more people working for themselves than ever, calculating child support payments is becoming more complicated. If you or your former spouse is self-employed, be aware of how the court will use employment information to calculate support payments.
Self-Employment Income
Child support and spousal support payments depend heavily on a person’s reported income. While it is easier to calculate the support requirements of a person who receives a regular salary, an accurate accounting of self-employment income is possible when the self-employed person is forthright about his or her income and expenses.
A person who owns a business or is in business for themselves is not required to pay support based solely on how much money he or she earns. Self-employed parents are allowed to deduct business expenses from their gross profits, and their income will be calculated based on their net earnings.
Usually, self-employment income will be calculated based on a person’s tax returns, which must list the amount of income and expenses a person’s business earns each year. Additional information, like bank account statements, profit and loss statements, business ledgers, or financial affidavits can be used to create an accurate financial picture for the court. Often, a person who is self-employed will have to submit to a deposition, and answer questions about his or her financial state of affairs.
Hidden Self-Employment Income
Unfortunately, some self-employed parents will manipulate their income in order to make it appear as if they earn less money than they actually do. For example, a person could inflate their business expenses to make it seem as if they earned less net profit than they should have; other times, a business owner may list personal assets or other expenses in the company’s name, which will also confuse the calculations.
When a self-employed person attempts to hide assets or income, often his or her former spouse is the best resource to uncover the deception. Most people have a good understanding of their spouse’s standard of living—if the numbers change drastically once the marriage ends, there is a good chance that income is being hidden or expenses are being padded.
If a self-employed spouse is not being truthful about his or her income, there are multiple legal options which can be used to create accurate numbers. In some cases, the self-employed person may be required to turn over financial documents, bank statements, and tax returns in order to justify his or her income. In other cases, attorneys for the spouse seeking support may hire investigators to search for hidden assets, or forensic accountants to search for mistakes or omissions.
Help For Spouses
If you are self-employed, and are unsure about how to accurately report your income for child support purposes, it is important to speak with an attorney about your obligations. Failing to report all of your income could result in several serious consequences, like fines, contempt of court, or being ordered to pay attorneys’ fees.
Alternatively, if you think that your self-employed spouse is hiding assets or lying about his or her income, consult with your attorney as soon as possible. At Pacific Northwest Family Law, we believe that all parents have an obligation to support their children as fully as possible, and will help you hold your spouse responsible for his or her fair share.
At Pacific Northwest Family Law, our attorneys are experienced with high-conflict divorces, and know how to hold deceptive spouses accountable. If you are getting a divorce or are navigating a complicated child custody matter you need to know what your options are. Call us at 360-926-9112 to schedule your appointment.