Calculating Child Support with Self-Employment and Variable Income
When you are self-employed or your income changes from month to month, determining income for child support can be more complicated than looking at a paycheck. Business revenue may fluctuate, commissions and bonuses may vary, and the expenses shown on a tax return do not necessarily tell the whole story.
Washington law establishes specific rules for determining income for child support. Understanding which income must be disclosed, which deductions may be allowed, and which records may be required can help you prepare for the calculation.
At Curiale Hostnik PLLC, we help parents address child support and other family law matters. Located in Puyallup, Washington, we serve clients in Tacoma and throughout Pierce County, including Gig Harbor and University Place. If self-employment or variable earnings are complicating your child support matter, contact us to discuss your circumstances.
The Basics of Child Support Calculations With Variable Income
Washington uses the Washington State Child Support Schedule to calculate child support. Both parents must disclose their income and resources, although only the income of the parents whose children are involved in the case is used to calculate the basic support obligation.
Washington law includes income from numerous sources when determining gross monthly income. These sources include wages, salaries, commissions, bonuses, overtime in most circumstances, and income from self-employment, contracts, partnerships, and closely held corporations.
The calculation then requires determining each parent's net monthly income after applicable deductions.
When your earnings fluctuate, accurately documenting your income becomes especially important. The law generally requires tax returns for the preceding two years and current pay stubs to verify income and deductions. Additional documentation may be required if the necessary information is not available in those records.
How Self-Employment Income Could Affect Child Support
Self-employed parents often have financial records that look very different from those of traditional employees. Revenue may rise and fall throughout the year, and money coming into a business is not necessarily the same as the owner's personal income.
Washington law allows normal business expenses and self-employment taxes to be deducted from gross monthly income when calculating net income for a self-employed parent. However, if there is a dispute over a claimed business expense, the parent seeking the deduction must justify it.
Relevant financial records may include:
Tax returns: Washington generally requires the preceding two years of tax returns to verify income and deductions.
Profit and loss statements: These can provide information about business revenue and expenses that may not be apparent from other records.
Bank statements: Business and personal account records may help clarify income and financial activity when additional verification is necessary.
Business records: Contracts, invoices, accounting records, and other documents may help establish the nature and amount of business income or expenses.
Complete documentation can be particularly important when parents disagree about what the business actually earns or which expenses should be deducted from income for child support purposes.
Reviewing Variable Income When Determining Child Support
Variable compensation does not automatically fall outside a Washington child support calculation. State law expressly includes commissions and bonuses in gross monthly income, as well as most overtime and income from second jobs.
Variable income can include:
Commission-based earnings: Your compensation may vary based on sales, contracts, or other performance metrics.
Seasonal income: Your earnings may rise or fall at predictable times of the year.
Business income: Self-employment earnings may fluctuate because of changes in revenue and legitimate operating expenses.
Bonuses and other compensation: Under Washington law, bonuses are generally included in gross monthly income.
Some nonrecurring income receives different consideration. Washington courts may deviate from the standard calculation when a particular source of income is genuinely nonrecurring. Depending on the circumstances, this can include bonuses, overtime, contract-related benefits, or second-job income. For this type of deviation, the court reviews the nonrecurring income received during the previous two calendar years.
Common Issues When Calculating Child Support for Self-Employed Parents
Determining self-employment income for child support can raise disputes that do not typically arise when both parents receive regular wages.
Common issues include:
Business versus personal expenses: Financial records may need to distinguish legitimate business expenses from personal expenditures.
Allowable business deductions: A deduction used for another financial or tax purpose should not simply be assumed to receive the same treatment under Washington's child support rules.
Fluctuating revenue: A business may experience significant changes in revenue from one period to the next.
Incomplete records: Missing or unclear documentation can make it more difficult to establish actual income and allowable deductions.
Washington law also permits courts to impute income in certain circumstances involving voluntary unemployment or underemployment. The statute identifies numerous factors courts consider, including employment and earnings history, job skills, education, health, the local job market, and other relevant circumstances.
Other Factors That Influence Child Support
Income is central to the Washington child support calculation, but the final obligation can involve additional considerations.
Some factors that may affect child support include:
Healthcare expenses: The child support schedule addresses healthcare coverage and expenses for children.
Childcare expenses: Daycare and other special child-rearing expenses may be allocated in addition to the basic support obligation.
Educational expenses: Certain educational costs may also be considered under Washington's child support rules.
Grounds for deviation: In appropriate circumstances, a court may deviate from the standard calculation based on statutory factors.
Because the calculation is governed by Washington's child support statutes and schedule, determining the appropriate amount requires more than estimating each parent's average monthly earnings.
Good financial records can be particularly valuable when you own a business or receive compensation that changes throughout the year.
Speak to a Family Law Attorney Today About Child Support
Self-employment and variable income can make child support calculations more complex, especially when parents disagree over business expenses, fluctuating earnings, or the financial records used to determine income.
At Curiale Hostnik PLLC, we help parents understand Washington child support requirements and address financial issues that arise during the calculation process. We serve clients in Tacoma, Puyallup, and throughout Pierce County, including Gig Harbor and University Place.
If your income or the other parent's income comes from self-employment, commissions, bonuses, or other variable sources, contact our Washington family law attorney today to discuss your child support matter.