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“Gross Income”—Getting it Right on the Sworn Financial Statement – Part 1

The Sworn Financial Statement is one of the most important documents you will need to complete if going through a divorce or custody case. Also called a “financial affidavit”, it requires each person in the case to use the form approved by the Court and list all income, assets and debts. The Court will use the Sworn Financial Statement to determine how to divide assets and, most importantly, to determine a Party’s need for spousal maintenance or a Party’s ability to pay spousal maintenance.

The first page of the Sworn Financial Statement requires a listing of “gross income”—meaning all the money received each month before any taxes or other deductions are taken out. Gross income includes regular wages from employment but also includes most other funds received, whether from disability, a rental unit for which a Party receives rent each month, social security, bonuses and even regularly paid “gifts” of money from parents helping out their son or daughter. The Colorado child support statute lists the many ways money received is considered “gross income”:

(I) “Gross income” includes income from any source, except as otherwise provided in subsection (5)(a)(II) of this section, and includes, but is not limited to:
(A) Income from salaries;
(B) Wages, including tips declared by the individual for purposes of reporting to the federal internal revenue service or tips imputed to bring the employee’s gross earnings to the minimum wage for the number of hours worked, whichever is greater;
(C) Commissions;
(D) Payments received as an independent contractor for labor or services, which payments must be considered income from self-employment;
(E) Bonuses;
(F) Dividends;
(G) Severance pay;
(H) Pensions and retirement benefits, including but not limited to those paid pursuant to articles 51, 54, 54.5, and 54.6 of title 24, C.R.S., and article 30 of title 31, C.R.S.;
(I) Royalties;
(J) Rents;
(K) Interest;
(L) Trust income;
(M) Annuities;
(N) Capital gains;
(O) Any moneys drawn by a self-employed individual for personal use that are deducted as a business expense, which moneys must be considered income from self-employment;
(P) Social security benefits, including social security benefits actually received by a parent as a result of the disability of that parent or as the result of the death of the minor child’s stepparent but not including social security benefits received by a minor child or on behalf of a minor child as a result of the death or disability of a stepparent of the child;
(Q) Workers’ compensation benefits;
(R) Unemployment insurance benefits;
(S) Disability insurance benefits;
(T) Funds held in or payable from any health, accident, disability, or casualty insurance to the extent that such insurance replaces wages or provides income in lieu of wages;
(U) Monetary gifts;
(V) Monetary prizes, excluding lottery winnings not required by the rules of the Colorado lottery commission to be paid only at the lottery office;
(W) Income from general partnerships, limited partnerships, closely held corporations, or limited liability companies. However, if a parent is a passive investor, has a minority interest in the company, and does not have any managerial duties or input, then the income to be recognized may be limited to actual cash distributions received.
(X) Expense reimbursements or in-kind payments received by a parent in the course of employment, self-employment, or operation of a business if they are significant and reduce personal living expenses;
(Y) Alimony or maintenance received, as adjusted, if applicable, pursuant to subsection (5)(a)(I.5) of this section; and
(Z) Overtime pay, only if the overtime is required by the employer as a condition of employment.

(To be continued…..)

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