Role of Income Tax Returns in Determining Child Support Obligations

In order to properly determine a parent’s child support obligation, it is important for the court to know what the parent actually earns. Tax returns reveal not only what a parent has historically made, but may also reveal amounts the parent has been concealing or if the parent is intentionally impoverishing him or herself.

Historical Earnings

For the most part, tax returns are presumed to reflect the earnings of the parents and may be used by a court to establish each parent’s child support obligation. All too often, a parent who has earned a substantial income comes into court claiming that he or she is now earning significantly less money. Sometimes the allegation is truthful and the loss of income is one of the reasons that the parents could no longer get along and decided to separate. More often, the loss of income is temporary, lasting from a few months before a child support hearing until the date child support is set. It is an intentional loss of income by the parent to reduce the child support obligation.

Wage and Overtime Earnings

A child is entitled to be supported in the manner the parents established while the parents lived together. When a parent has routinely worked two jobs or worked overtime, the court will use the history of the parent’s income, as shown on the tax returns, to calculate child support. The parent will have to prove that overtime is no longer available or that there is a reason why the parent no longer has the second job. If the parent voluntarily chooses not to work overtime, the court can impute income and may still establish child support based on the income shown on the tax returns. As an example, where a stevedore has routinely worked overtime, resulting in an annual wage of $100,000 per year, comes into court with pay stubs showing income of $1,000 per week for the four weeks prior to the hearing, a court will use the full $100,000 as shown on the tax return unless the stevedore can show that no overtime is available to him.

Self-Employment

Tax returns also are sources of information on a parent’s self-employment earnings, whether the earnings are through a sole-proprietorship or a small corporation. A parent will have to explain any discrepancy between the amount shown as earnings on the tax return and an alleged decrease in earnings. The returns may also reveal the devices used by the parent to conceal income from the Internal Revenue Service to reduce the parent’s tax liability. A spouse may be able to show that the expendable income available to the family during the course of the marriage was greater than the amount shown on the tax return.

Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.