How Self-Employment Income Influences Child Support Calculations in New Jersey

Figuring Out Child Support Can Be Complex, Especially for Self-Employed Parents With Variable Income. Our Lawyers Explain How to Accurately Report Your Income, Navigate Common Challenges, and Ensure Your Child Receives the Support They Deserve.

Agreeing upon how much child support should be paid is one of the most challenging parts of getting a divorce. Unfortunately, many couples view child support as a way to seek revenge by obligating their co-parent to pay as much as possible rather than focusing on the support’s purpose, which is to provide for their child’s needs.  In turn, the obligor sometimes misrepresents their income to avoid paying what they consider an excessive amount of support.  Despite having to report their income for tax purposes or to obtain credit, self-employed parents can play a numbers game that reflects fewer earnings, providing an opportunity to get away with paying less monthly support.

Ensuring Fair Child Support in a Self-Employment Scenario

Before discussing how child support is calculated in a self-employment scenario, it’s essential to understand that the Family Court bases its child support decisions on a set of “Child Support Guidelines.” These guidelines were created to establish child support payments fairly and equitably, providing a stepping-off point for the family courts to determine the appropriate amount of support.

New Jersey’s support guidelines are based on the standard of living the family experienced prior to the divorce. It is unrealistic to expect no change in that standard of living, but the calculations provide an approximate amount.  The parent’s gross incomes are calculated, and payments are based on their income.  If one parent earns $3,000 monthly while the other earns $6,000, the heavier support burden would fall on the parent who earns the most.

Calculating support from self-employment income can be more challenging than from salaried wage earners.  Seasonal income, such as wedding planners, landscapers, and food truck owners, may experience a “feast or famine” income pattern that makes scheduling regular child support payments difficult.  Additionally, self-employed individuals may seek informal personal loans from friends or family without scheduled repayment plans, which may cause their disposable income to waiver.

Self-employed individuals play a crucial role in the child support calculation process. They must keep impeccable income, profit, loss, expenses, and investments records and file a Form 1040 Schedule C to report their information for tax purposes. These records, along with invoices, sales records, receipts, and bills, can assist the court in adjusting support payments, ensuring a fair and accurate calculation.

Unmasking Financial Misconduct in NJ Child Support Cases

The case of K.W. v. S.W. is a clear example of the Appellate Division’s intolerance for manipulating income in a self-employment scenario and bad faith custody requests.  K.W. and S.W. were divorced after 9 years.  They shared two children and signed an MSA (Marital Settlement Agreement) stipulating that they would have joint legal and physical custody with a final residential custody arrangement pending, following pending evaluations.  The defendant was the PPR, with one extra overnight per month.

The Plaintiff agreed to pay $33,600 annually in alimony for 42 months and $73 weekly in child support. When the alimony payments ceased, support was to be re-evaluated.  According to the MSA, the payments were based on the Plaintiff’s gross income of $185,000 and the Defendant’s imputed income of $125,000. During five years of post-judgment litigation, the Plaintiff insisted on having an accurate shared 50/50 parenting schedule during the entire year.  Then, changing horses mid-stream, he began arguing to become the PPR (Parent of primary residence).

The Plaintiff testified that his income was $163,000, as he had taken control of the family construction business from his father. He had complete control of the wages and salaries of all employees, including his girlfriend, who worked for the company and had received numerous raises.  The defendant worked as a part-time pharmacist, as she had during the marriage, and could not find full-time employment due to a lack of formal education.

The judge did not take kindly to the defendant’s antics and, in a 60-page decision, found the Plaintiff’s testimony to be misleading, especially regarding profits, income, and bonuses.  The court believed the reported stagnant income by the Plaintiff was an attempt to lower the overall earnings artificially.  The court ordered $251 per week in child support. It made the Plaintiff responsible for 100% of the summer activities, car insurance and maintenance of a vehicle bought for one of the children, and payment of over $102,000 in legal costs for the Defendant.

When Self-Employment Collides with Imputed Income for Support Payments

Jordana Elrom (Plaintiff) v. Elad Elrom (Defendant) appealed a final judgment of divorce.  Elad claimed that the imputation of his income to determine child and spousal support resulted in a much higher income than he earned.  The courts will impute a parent’s income if they believe the parent is purposefully unemployed, underemployed, or reporting less income than is earned. The court will look at the parent’s skills, studies, experience, age, past income, and average market earnings for a position similar to the parent’s work level.

Elad is a software engineer who works in web development and is an entrepreneur, making as much as $300,000 in the years before the trial. He also owned a consulting business, sponsored trade shows, and worked with many start-ups. The trial court imputed his income of $230,731.42, while his wife’s income as a part-time attorney was imputed at $80,640.

Elad was ordered to pay spousal support of $1,000 weekly and child support of $697 weekly, which included 50% of the unreimbursed medical expenses, work-related childcare, and half of the children’s extracurricular expenses.  On appeal, Elad argued that income should only be imputed when a parent is underemployed or unemployed as he was unemployed at the time of trial and was shown not credible in terms of employability based on his skillset and experience. In Elad’s favor, the Appellate Court did not require him to pay for additional childcare as the mother was not working.

How Clear Records Ensure Accurate Child Support for All

The key to reporting income for reasons of child support is transparency.  When the self-employed parent willingly provides regularly updated profit and loss statements, bank records, tax returns, invoices, contracts, and detailed expense reports, their position appears more credible.  When getting information from a self-employed parent is akin to pulling teeth, it may seem they have something to hide.

Questions About Child Support Payments When Self-Employed? Contact Our Family Lawyers in Brick and Sea Girt, NJ For Answers

Whether you suspect your self-employed former spouse is not being forthright about their income, or you are self-employed and need help proving your numbers are on the up and up, our legal team is ready.  It is of the utmost importance that your child receive the support they are entitled to.

The attorneys at The Bronzino Law Firm have worked with many families struggling with this issue and have had excellent results in Lavallette, Toms River, Rumson, Sea Bright, Red Bank, Wall, Berkeley, Mantoloking, Lakewood, and Manasquan.  We are skilled negotiators and investigators.  Our seasoned attorneys know your case is unique, and your concerns should be addressed as such.

If you are self-employed or are experiencing custody or child support issues with a spouse who is, call us today at (732) 812-3102 or contact us online for a free consultation.