FAMILY LAW ARTICLES
When differentiating types of wage earners for a child or spousal support, we have several ways to figure it out. How easy or difficult this will depend on the type of wage-earner that your spouse is.
Typical Wage Earner
A W2 employee is who we think of as the typical wage earner, someone who works for an employer and has taxes withheld from their paycheck. Income support may include benefits that the employer provides to the spouse.
All of this will be shown on their paystub, so it’s relatively straightforward to gather evidence of their income. However, sometimes people try to get creative and alter their pay stubs. We have ways to deal with that by looking for inconsistencies.
There is a wide range of self-employed people, from those running small businesses to majority shareholders or general partners in a company. How hard it is to determine their income also varies. Sometimes it’s easy to find a self-employed person’s income because they’ve kept excellent books, and other times it’s not so simple.
Usually, self-employed people pay themselves with a draw. Throughout the year, they are getting 1099s, which are IRS forms that record non-employee income. At the end of the year, they have their bookkeeper figure out what is deductible and what isn’t.
The income available for support may be more than just the business’s net profit because many small business owners run personal expenses through their companies. These expenses may be tax-deductible, but they shouldn’t be removed from the income available for support. That’s one area where we have to dig in to find their total revenue.
Majority Shareholder or Person Running a Corporation
Officers of a business have various sources of income, including profit sharing. Suppose you want to make sure that you are very well-positioned for your divorce. In that case, you need someone who thoroughly understands business structures and compensation to assess your spouse’s income accurately.
Passive Wage Earners
People may have passive income whether or not they also hold a W2 employee position. Types of passive income include rent, stock growth, and inherited money. This income is usually taxable, so that we can find it fairly quickly.
These types of income are available for support. Don’t assume they aren’t, even if they are separate property and not divisible in the divorce. They would still count as available income for calculating support payments.
Another type of passive income is money received by people who are not working or who can’t work. Examples are disability, retirement, or unemployment benefits. Usually, these benefits, whether or not they are taxable, are income available for support.