The Dangers and Pitfalls of Being A Self Employed Individual in Family Court
There are relatively few family lawyers that specialize in “high-end” or “more-complicated” cases. Unfortunately, if you are self-employed, or have your own business, you will need one of those lawyers. There are many dangers and hurtles in Family Law for self-employed people.
If you are self-employed, you will need a good lawyer who does support claims for self-employed people. Child support for self-employed people is not based so much on their tax returns as on how much money they actually receive from the business. The job of calculating how much money you actually receive, and what that amount translates to as an income for child support is a complex job. If you don’t get a lawyer who understands these issues, you have the possibility of getting into serious trouble in court because your spouse can allege that you are hiding money in the business, or that all your business expenses are really personal and therefore should be counted as income to you, or that income should be imputed to you (you have to pay support based on more than you actually earn) because of an inflated expectation of what money you SHOULD be making in the business, as opposed to what you actually do, OR you there may be deductions from your income that you might miss, even though they would reduce the amount of support you should pay. There are a lot of dangers for self-employed people.
The bulk of my business is determining the appropriate income for child support for people who are not just “T4 employees.” Unfortunately, the cost of determining a self-employed person’s income for child support purposes is an expensive endeavour – often for both side as your spouse may want to verify what you are saying. That often results in adjustments to child support being made every few years, instead of every year as contemplated by the Child Support Guidelines. There are a number of strategies available to both the self-employed person and their spouse. To arrive at an order that is fair, you must know either how to implement those strategies or how to combat them.
It is VERY important that you not stop paying support while your income is determined. This is one the guaranteed ways to lose in family court. You should be paying support pursuant to the child support guidelines. Until you calculate what your income is for child support purposes, you should pay child support based on what your “total income” is or would be on your income tax return (found at line 150). The amount of child support you should be paying the “ able amount”, which you can look up at HERE (you have to scroll down a bit to get to the tables) PLUS a share of large expenses (e.g. day care or particularly expensive sports or activities). You and your spouse divide up the large expenses (called special and extraordinary expenses), in proportion to your respective incomes. This may mean that you have to increase what you are paying, but doing that voluntarily will only help you in how you appear to family court judges and can save you a lot of pain later on.
This one minute video also gives an explanation as to why income for child support or income for spousal support can be different from income for taxes for people who are self-employed.