Many people are self-employed and control how much income they report on their tax returns. If they are under reporting their income, they do it in numerous ways including: not reporting cash, overstating business expenses, paying personal expenses through the business, cashing checks from customers and bartering services.
When confronted with this situation during a divorce it is important to discuss with your attorney the lifestyle that you and your spouse have and the method in which marital bills are paid. Do your living expenses exceed your family income? Does your spouse always pay in cash for dinners out, vacations, jewelry, clothing, food and other expenses?
If your spouse has a business the first step is to look at the corporate tax return or Schedule C of the personal tax return to look at the gross, the salaries, officer compensation, purchases and expenses. If the person reports $100,000 gross income and a net of $15,000 there are numerous warning signs that the reporting is not accurate, if the business has been established for some period of time. If the net income is only $15,000 then how are the martial expenses including mortgage, utilities, health insurance, car insurance, car payments, gas, vacation and expenses for the children being paid? If there is no significant debt, then the money must be coming from somewhere to meet the living expenses.
If the business has cash customers, the owner probably keeps a list of the cash and the customers that pay cash. Find that list and give it to your attorney. If the business has several employees but pays no salaries that is another sign of cash income.
It will be important to have documents and records produced, insurance applications, mortgage applications, car loan applications all of which often indicate a higher reported income to qualify for the loan or to obtain adequate insurance for the "non-employees". Often the services of a forensic accountant are utilized not only to determine business value but also income. How much equipment does the business own, how much in supplies and materials are purchased? How busy is the work calendar with jobs?
The task is not easy but with a highly experienced matrimonial attorney you will be helped. Of course there are some people whose businesses are failing and they are borrowing large sums of money to support a losing venture, which is why it is important to look at the whole picture.
Determining the real income is vital to obtaining the proper amount of child support and
spousal support. Please call my office so that I can help protect your rights to adequate support for you and your children.