By Hope Tuber
The starting point for the calculation of child support is the previous year’s tax returns. However, while this is the starting point, there are many factors which may lead the Court to enhance or adjust income when determining the proper amount of child support. For instance, Courts will also look to your most recent pay stubs or the year to date figures. Why? There may have been a dramatic change in income since the filing of your latest tax return. It is easy to foresee two quick examples where using the last tax return will provide a child support award that is inadequate or unjustified. First, if you unexpectedly lose your job after your tax return has been filed. Clearly the award based on employment that you no longer have will be unduly burdensome. Also, if you receive a significant pay raise after your taxes are filed, you may not be paying enough.
When calculating child support the Court will also investigate whether the non-custodial parent receives a bonus. Such bonuses may be reflected on pay stubs or in an employment contract. The Court will include these bonuses to the child support calculation. Other factors the Court will consider include but are not limited to: (1) investment income; (2) workers’ compensation benefits; (3) disability benefits; (4) veteran’s benefits; (5) pension and retirement benefits; (6) fellowships and stipends; and (7) annuity payments. A personal injury settlement may also be considered when calculating child support payments, especially if part of the award was granted for future and/or loss wages.
Imputation of income: I began this topic with what happens if you lose your job and your tax returns may not accurately describe your income. The Court will look into the facts and circumstances of the loss of income. If you lost your job through no fault of your own the Court will take that into consideration when calculating child support. If however, you purposefully lost your job, i.e. you quit or you took another job to lower your income and thus lower your child support payments, the Court may impute income to you. For example, you were earning $100,000.00 and you quit your job and are now making $50,000.00. If the Court determines that you did this to lower your child support obligations, it may award child support based upon the $100,000.00 salary regardless of what you are currently earning. This also comes into play when the non-custodial parent owns his/her own business and the tax returns do not adequately reflect the party’s true income for child support calculations. In this instance, the Court will consider the lifestyle of the parties during the marriage and award child support at its discretion.
In sum, the tax return is simply the starting point for determining child support calculations. There are many considerations that must be taken into account to award the proper child support award. If you need further clarification, please feel free contact us to help guide you through this process