A lot of our clients are business owners. As business owners, our clients often have a lot of expenses that they often claim on their income tax returns for purposes of determining their personal gross income. One of the issues in child support cases becomes determining a parent’s net income. Once that number is determined, the courts will apply guidelines amount to determine a child support number. For one child, the courts will order child support at 20% of the net income, if two children, then 32%, etc. As such, determining a parent’s net income becomes a very big deal.
For those who work regular W-2 jobs, their net income can easily be determined. However, for those who earn 1099′s or even just cash, it becomes a fight for the numbers. For tax purposes, those who have 1099′s can claim certain expenses as business expenses. For example, cell phone bills, gas, tolls, clothing, etc. The question, however, becomes, just because you can claim it for tax purposes, is it fair to a child to claim an entire cell phone bill or other expenses for child support purposes? And is it fair to allow a parent to deduct the entire business expenses for child support purposes?
Often times it becomes a war over the numbers. Most attorneys or judges may just split the baby in half. Others will tediously review all of the expenses and determine which ones they will consider and which ones they won’t. The argument in essence is that without the business expenses, the parent would not be able to produce that amount of income. If the parent does not employ an assistant, then he will be in the office answering phones instead of bringing in more clients, etc. However, if the parent wants to include his entire car payment which he also uses for personal use, that may not be fair to the child.
As such, if you are a 1099 employee or get paid in cash, it is important to contact an attorney to help you determine what your true “net income” is for purposes of child support.