Unreported income impacts child support amount in California

Readers in Orange County, California, may understand why people divorce. Divorce allows both parties to move on with their separate lives. The divorce process is more complicated, however, than simply moving out from the couple’s home. Typically, divorcing couples will attempt to make a settlement agreement where both parties aim to reach a fair resolution. Unfortunately, conflicts may arise while establishing the settlement, particularly when it comes to full disclosure of assets, child support and custody, property and income. Dishonesty about finances may not only ruin the fair division between the spouses, but also may get in the way of necessary child support payments.

Child support is the monthly payment received by a custodial parent for raising the child or children that the couple had during marriage. The amount of child support can be based on child care costs, health care and everyday expenses. Courts will take into account the income of the parents in calculating the final amount. In California, a former spouse’s promotion to a job, inheritance or remarriage may increase the child support payments. For this reason, if the supporting parent is not honest about his or her financial information during the divorce, child support can be subjected to modification.

Accordingly, a spouse’s income has an important role in child support calculations. In some instances, spouses fail to reveal their true income — for example, especially if they own a business and have an additional part time job.

These sources of income may provide cash without the knowledge of the other partner. Secret cash may not be subject to tax returns and can easily be hidden.

Due to this issue, spouses should understand the flow of finances in the household. For those people with a business, their spouses should have a strong understanding of income and expenses in the business. This will permit the spouses to figure out if the other partner has unreported income and assets. The assistance of a professional can also help individuals going through a divorce to evaluate whether their spouse’s lifestyle is different from what is disclosed in the divorce document.

Spouses should be fully honest about their income and expenses while going through the divorce process. Because such factors affect child support payments, fully disclosing all sources of income will be in the best interests of the child.

Source: Forbes, “What a Divorcing Woman Needs to Know About Her Husband’s Cash-Based Business,” Jeff Landers, Jan. 30, 2013