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How Do I Prove My Spouse’s Self-Employed Income?

When it comes to matters such as a determination of the proper amount of alimony, child support or the equitable division of assets it is imperative that each spouse has accurate information about the other party’s finances. Depending on the household, information may be hard to obtain. Typically, in households where both spouses receive the majority of their income as a W2 employee the calculation of equitable division or support is pretty straightforward. However, in instances where a spouse if self-employed things can become quite complicated.

Georgia statute O.C.G.A §19-6-15 defines self-employment income as:

  • income from, but not limited to, business operations, work as an independent contractor or consultant, sales of goods or services, and rental properties, less ordinary and reasonable expenses necessary to produce such income.
  • Income from self-employment, rent, royalties, proprietorship of a business, or joint ownership of a partnership, limited liability company, or a closely held corporation is defined as gross receipts minus ordinary and reasonable expenses required for self-employment or business operations.

Ordinary and reasonable expenses of self-employment or business operations necessary to produce income do not include:

  • Excessive promotional, travel, vehicle, or personal living expenses, depreciation on equipment, or costs of operation of home offices; or
  • Amounts allowable by the Internal Revenue Service for the accelerated component of depreciation expenses, investment tax credits, or any other business expenses determined by the court or the jury to be inappropriate for determining gross income.

Business deductions can make it very difficult to determine the proper amount a spouse is owed. This is because every business is different and miscellaneous expenses such as advertising, meals and entertainment and other forms of overhead allow for countless opportunities for a dishonest spouse to hide assets. In any divorce civil action related to the division of assets or support the court will require both parties to prepare a Domestic Relations Financial Affidavit (DRFA). This is a sworn statement that each party prepares and submits to the court listing all of their assets, income and expenses. Because each party must attest to the truthfulness of the information provided in the documents, there can be severe penalties if the information is proven to be incorrect at a later date.

In addition to the (DRFA), other documents such as bank statements, business contracts, IRS tax statements, Georgia Department of Revenue tax statements, phone records, text messages and forensic evaluations of computers are all some of the useful sources of information and technics that skilled divorce attorneys utilize in order to get an accurate picture of an opposing party’s income. Additionally, for particularly complex cases, forensic accountants can also be utilized to determine the correct amount of income that a self-employed spouse is earning.

One of the most useful techniques is to review spending habits of a self-employed spouse over an extended period of time. For instance, a couple can have an idea that their relationship is heading towards a divorce for a period of time. This can give a party an opportunity to prepare for that possibility. If a spouse is observed with increased suspicious activity such as moving monies from business accounts, making large purchases and increasing their spending on miscellaneous items it can be a signal that a party is attempting to create the appearance of decreased income or simply hiding assets. These scenarios create opportunities for increased litigation. Ultimately, if you have a stake in the assets or income from the business as martial property or are depending on the other party’s self-employment income for support it is imperative that a true picture of the income is obtained. Attorneys at the Faucette Law Firm, LLC have extensive experience in all divorce and family law related matters such as contested and uncontested divorce, child support, child custody, legitimation, alimony, modifications and adoptions. We will advise you of all of your legal rights and guide you through the process. Contact our law firm today for a consultation.