Of all the issues a couple might confront during a divorce, issues involving children are often the most important. Certainly, parents want to do all that they can to support their children and help them move through the divorce process with as little stress as possible, and onto a better and brighter chapter ahead. An important part of doing so is providing the support and ongoing care that children need. One aspect of that is the child support that one parent pays to another as part of a divorce.
There are many aspects of the divorce process that can be complicated – and child support can certainly fall into that category. Often, parents wonder exactly what that obligation might look like, and there can be many questions, depending upon the particular job and salary that a parent has.
This can particularly be true for self-employed parents, who may not have a predictable, scheduled salary, and who may have a variety of expenses associated with running their business, or with the self-employed nature of their job. How is child support calculated for these parents? It’s an important question to ask, particularly as in our modern economy, the number of self-employed workers is steadily increasing.
Let’s take a closer look at how child support may be calculated in these instances, beginning with a look at the North Carolina Child Support Guidelines.
A Closer Look at the North Carolina Child Support Guidelines
The North Carolina Child Support Guidelines are a uniform set of guidelines established by law and used to determine child support obligations in North Carolina. Fortunately, these guidelines are fairly straightforward. Typically, by inputting each parent’s income and the number of days they have custody, the amount of a child support obligation can be estimated within a reasonable amount. Those interested can use a child support calculator to estimate potential child support obligations – though this should never serve as a substitute for the advice of a knowledgeable and experienced attorney regarding your particular circumstances.
The North Carolina Child Support Guidelines address income earned through self-employment as follows: “Gross income from self-employment, rent, royalties, proprietorship of a business, or joint ownership of a partnership or closely held corporation is defined as gross receipts minus ordinary and necessary expenses for required self-employment or business operation.”
Generally, “gross income” is income that a person receives from all sources. This might include wages, rental income, interest, and income from self-employment. What exactly does this mean? What might it mean for your particular circumstances? Looking closely at the nature of self-employment and how it is viewed by courts during the divorce process can be helpful.
Some Self-Employed Factors to Consider
Using a calculator like the one provided above seems fairly straightforward, and this can be true – in situations where income is steady and easy to predict and determine. What happens though, when one parent’s income is more difficult to determine? This can often be the case for self-employed individuals.
Self-employment can take a variety of forms. Some individuals own businesses that employ many people. Others may own a small enterprise with only a few employees. Still others are freelancers, tech start-up developers, or artists, to name a few of only many examples.
Essentially, in their simplest terms, the guidelines require that money made to operate the business be subtracted from money made by the business, leaving a figure that will ultimately be used by the guidelines. This formula does eliminate guesswork from the calculations to the extent that it uses a revenue versus expense method of calculation. As a result, it makes it more difficult for a self-employed parent to depreciate his or her income by refusing to take disbursements or certain profits to try and decrease income.
Ultimately, child support payments depend heavily on an individual’s reported income. Certainly, it is easier to calculate child support requirements when an individual receives a regular salary, an accurate accounting of a self-employed person’s income is possible if that person is transparent about their income and expenses, and organized about accounting and record-keeping concerning their employment or business.
Are Any Expenses Excluded from Child Support Calculations?
Those who are self-employed often wonder whether any expenses are excluded from child support calculations, and that’s an understandable question. The truth is that the gross income from a business rarely reflects its actual profit. As a result, the short answer is yes – the Internal Revenue Service and most states allow a self-employed parent to deduct the expenses of a business from its gross income before including that figure in a calculation for child support purposes.
In addition, North Carolina courts have been known to exclude additional business expenses, depending upon the unique circumstances of the business owner. Generally, courts are given wide latitude in deciding which business expenses can and cannot be excluded from child support calculations.
The self-employed parent will want to make sure to track and document revenue and expenses for a variety of reasons. Not only will it help determine what your potential child support obligation might be, but it will also be necessary to provide that documentation during the divorce process. Having it organized and ready will be important and helpful as the divorce proceeds.
Enforcement of Child Support Obligations
Although child support may be slightly more difficult to calculate for self-employed individuals, the obligation to pay it is no less binding. Regardless of whether the parties agree to a child support amount as part of their divorce settlement, or if the support amount is determined by the court instead, the self-employed parent must make payments on time and in the right amount.
The truth is that it can be difficult, at times, for the state to collect payments in the traditional manner when a self-employed parent doesn’t pay. This is because often, the self-employed parent doesn’t have a regular paycheck from which payments can be withheld. Nevertheless, there are other methods by which child support enforcement agencies may collect, including placing liens on the payments to the business from customers, collecting money directly from the bank account owned by the business, and other similar actions.
Ultimately, child support, like all divorce issues, can be complicated. As a result, you’ll need guidance and direction from an attorney who knows and understands the law and can pursue the best legal strategies on your behalf. At The Law Office of Dustin McCrary, we’re here for you.
THE LAW OFFICE OF DUSTIN MCCRARY – HERE FOR YOU
At The Law Office of Dustin McCrary, we understand every aspect of the divorce process. Whether you’re facing issues of child support, child custody, or any other issue that may arise, we’re here for you, and we know the best legal strategies to pursue on your behalf. We know that divorce can seem overwhelming – but it doesn’t have to be. Although it’s a difficult journey, we’re here to walk with you each step of the way and to provide the expert guidance and assistance you need and deserve. If you’re ready to get started, we’re here for you. Give us a call. We look forward to speaking with you soon.