In family law, understanding a party’s income is crucial for determining support obligations. This blog breaks down how to discover income based on various employment circumstances, from salaried employees to self-employed individuals and retirees.

Salaried Employee

When dealing with a salaried parent, determining income is usually straightforward. Tax returns and current payroll vouchers (pay stubs) typically provide the necessary information for calculating guideline support orders. It’s essential to consider not just the salary but also any employee benefits, which may include bonuses, commissions, stock options, and various allowances. Courts have the discretion to include these benefits when assessing a parent's financial obligations, as seen in cases like Marriage of Stanton (2010). If the opposing party is uncooperative, document production requests or subpoenas may be necessary to obtain this information.

Practice Tip: Even seemingly simple pay stubs can be tricky to analyze; some employers list benefits in a confusing manner. If needed, obtain the employee’s permission to discuss these details with the employer’s payroll department.

Owner/Shareholder of a Business

For parties who own businesses, it’s crucial to gather detailed information about salaries, bonuses, corporate profits, and other perquisites. Both personal and corporate tax returns should be obtained, as the income considered for child support includes not only direct compensation but also profits from the business. An attorney must review corporate financial statements and various transaction records to uncover personal expenses disguised as business costs. Keeping an eye out for signs of self-dealing is essential to ensure that all income is accurately represented.

Practice Tip: A forensic accountant can be invaluable for determining the “cash available” for support, especially when business finances are complex.

Self-Employed Party

Self-employed individuals must file IRS Form Schedule C with their tax returns. Although courts may presume the accuracy of these returns, recent cases indicate that this presumption is not absolute, especially for self-employed parties. The burden of proof may shift to the self-employed individual to demonstrate the correctness of their reported income, as highlighted in Marriage of Hein (2020). Attorneys should gather various financial documents to verify reported income, including checking account statements and invoices, especially in cases where cash transactions may obscure actual earnings.

Practice Tip: Be cautious about the implications of challenging reported income and consult with your client regarding potential risks and protections under the “innocent spouse” doctrine.

Retired Party

Retired individuals still have child support obligations. Courts will evaluate income as described in Fam C §4058, even from retirement accounts like IRAs that a party chooses not to access. If a retiree can withdraw funds without penalties, it’s reasonable to argue that those funds should be available for child support. Expert testimony can provide insight into the retiree’s financial capabilities, including potential income from investments.