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Child Support and the Definition of Income

It is every parent’s responsibility to provide financial support for their child. While most parents want to do the right thing, there are a few that either try to skip out paying child support all together or they are not forthcoming and truthful about their income. In either situation, it is a crime to not support your child financially to the best of your ability. I have covered child support in past blogs, so I thought I would go into more detail as to what the courts consider the definition of income to be.

In the eyes of the court, income is any form of payment. By any form, they mean exactly that. The occurrence does not matter. It can be regular payments from an employer, periodic or otherwise. The source of the income does not matter to the courts either. Sources of income can be wages, salaries, commissions, bonuses, unemployment compensation, workers’ compensation, disability including Veteran’s Administration disability payments, pension or retirement payments, and earned interest.  However, the amount of income is only considered after deductions for:

  • Federal and state income taxes;
  • Social Security (FICA), Medicare, and railroad retirement withholdings;
  • Medical insurance paid for dependent children; and
  • Support payments currently being made for other dependents by court order, regardless of the date of entry of the order or orders.

The courts have intentionally left the income description as broad; therefore, it is designed to include the widest range of sources consistent with the State’s policy for the benefit of the child. However, if you look closely at various case decisions in Arkansas family law history, you will find that the law’s definition of income follows closely with the tax law’s definition.

  • Under federal law, inheritances are not considered income, but any interest or income earned from the inheritance is taxable. When considering child support, the courts view inheritances and the income earned in the same manner.
  • You must claim any gambling winnings as income and gambling losses are deducted from income. Child Support Guidelines follow this as well.
  • Federal Social Security Income (SSI) benefits are not considered income under Child Support Guidelines. For many, SSI benefits are not taxable either depending on adjusted gross income.

Some sources of income are easier than others to (for lack of a better word) hide. Since commissions are not a set salary and dependent upon the sales ability of the individual, they are often misstated. Child support guidelines use a similar method as you would if you were trying to prequalify for a home purchase. An average income is calculated based on the minimum draw plus additional commissions. For example, a real estate agent doesn’t typically get a salary, but if he or she has been selling real estate for a few years, the courts will draw a conclusion of annual income based on each year. Now, this can get a bit tricky if your ex is new to real estate when you settle on an amount but later starts earning more money the longer he or she sells real estate. If this is the case, you will need to file a petition for modification to the child support based on this evidence.

Self-employed parents are another tough one. The courts will generally calculate support based on the last two years’ federal and state income tax returns and the quarterly estimates for the current year. The self-employed payor’s income should include retirement plan contributions, alimony paid, and self-employed health insurance paid. Depreciation is allowed as a deduction only if it reflects actual decreases in the value of an asset. Something else a court will look at when determining child support is the payor’s earning capability or they will take a net worth approach based on property owned, the lifestyle he or she lives, and so forth.

Other parents are under a false pretense that if they are not employed they are not obligated to pay child support. The court disagrees, as it requires financial means to provide the basic needs of food, shelter, and clothing for a child. If a payor is unemployed or working below their full earning capacity, the court may determine income based on his or her full earning capacity, including considering the payor’s lifestyle just as with a self-employed payor. Additionally, incarceration does not relieve one of the child support obligations. The courts will, at a minimum, base child support on minimum wage.

When it comes to child support, your children deserve the most that is legally owed. It can get tiresome and overwhelming trying to figure out the income sources and if your ex is lying or not. Leave it to the professionals at Kevin Hickey Law Partners to do the work for you. We will work to make sure that all income is discovered and calculated to give your children everything they deserve. Call today for a consultation.