Income Determination for Self-Employed and High-Earning Spouses

How Much Should You Walk Away From Your Divorce With?

Divorce involving business owners creates immediate financial friction. Figuring out the exact income determination for the self-employed and high-earning spouses requires rigorous scrutiny. Whether you run a Bronx construction firm or a White Plains medical practice, actual earnings dictate future support obligations. A self-employed spouse’s income can be more difficult to determine because business finances may involve deductions, variable earnings, and other financial considerations. The lower-earning spouse may need a thorough review of the available financial records to understand the full picture of assets and earnings. At the Law Offices of David Bliven, we trace the money. We establish accurate gross income figures to protect your financial interests.

Do not let a financially deceptive spouse dictate your divorce terms. Call us today at 917-938-7827 to schedule a consultation and secure objective legal representation.

Evaluating Self-Employment Income in a Divorce Case

Determining income for a standard W-2 employee is straightforward; you just look at a recent pay stub. A self-employed person creates a much more complicated scenario. Business records may require scrutiny because reported business income can be affected by the treatment of expenses, deductions, depreciation, and other accounting practices. The treatment of expenses as business deductions can affect reported income for tax purposes and may require further examination in a support proceeding. The court may consider certain expenses or benefits when determining income available for support, depending on the circumstances.

Self-employment cases routinely involve cash businesses where revenue never even hits a bank account. Spouses might also barter services rather than accept money to keep transactions entirely off the books. We review tax returns and tax filings to uncover the full story. A Schedule C form provides a starting point, but it rarely shows the complete financial picture. New York law provides specific rules for determining income for child support and permits courts to require documentation, including tax returns, business records, corporate records, partnership records, and receipts for expenses. We look closely at lifestyle factors to see whether actual spending habits far exceed reported income. Significant discrepancies between reported income and a party’s lifestyle may warrant further investigation into the party’s financial resources and sources of income.

How New York Law Views Business Expenses

State law sets specific rules for calculating child support. Under New York Domestic Relations Law Section 240, income generally begins with gross income that should have been or should be reported on the most recent federal income tax return, subject to statutory additions and deductions.

The statute also provides specific rules concerning certain self-employment deductions and other financial resources that may be included when determining income for child support purposes.

A judge scrutinizes these deductions in Bronx and White Plains family courts. Certain business-related deductions and benefits may affect the income calculation. For example, New York law specifically addresses depreciation deductions exceeding straight-line depreciation and certain entertainment and travel allowances that reduce personal expenditures. Courts may also consider personal benefits or other resources available to a parent when determining income. These considerations can help the court determine an income figure that more accurately reflects the financial resources available when calculating support. We present concrete evidence proving which expenses legitimately benefit the business and which function as hidden personal perks.

Utilizing a Forensic Accountant to Find Actual Earnings

Getting to the actual numbers often requires outside financial investigation. In appropriate cases, we may work with financial professionals to analyze a self-employed spouse’s income and business structure. These financial professionals review bank statements, detailed business records, and partnership revenue. They match the reported profit directly against actual bank deposits to find the missing money.

This type of investigation may identify discrepancies, unexplained transactions, or other financial information requiring further examination. Forensic accountants comb through financial records to flag every discrepancy. They may identify transactions, changes in business activity, or other financial circumstances that warrant further investigation, including questions concerning the timing of income or business receipts. The added advantage is that forensic accountants are also experts who can testify at trial regarding the discrepancies found. We use this other evidence to determine the true earning capacity of the business owner.

Imputing Income Based on Earning Capacity

A spouse’s income or business earnings may decrease during a divorce, and the court may examine whether the reduction reflects a genuine change in circumstances or a voluntary reduction in income. For example, a spouse may leave a profitable position, reduce their involvement in a business, or accept lower-paying employment, potentially raising questions about whether the reduction in income was voluntary and whether income should be imputed. New York courts have authority to impute income in appropriate circumstances, including where a parent has reduced resources or income to reduce or avoid a child support obligation.

Rather than automatically relying on a reduced salary, the court may consider past earnings, employment history, education, earning capacity, and prevailing earnings levels when determining whether income should be imputed. The court may examine the circumstances surrounding the change in employment or income, including whether the reduction was voluntary and whether the evidence supports imputing income based on the party’s prior resources or earning capacity. We may present employment histories, financial records, and other evidence to establish whether a spouse’s reduced income warrants consideration of prior earnings or earning capacity for support purposes.

Securing a fair settlement demands a firm command of financial evidence. The Law Offices of David Bliven draws on nearly 30 years of family and matrimonial law experience, including David Bliven’s prior service as a Family Court Prosecutor with the NYC Administration for Children’s Services, to represent clients in complex divorce, custody, and support matters. Call 917-938-7827 to get the guidance you need today.