“Gross Income”— Getting it Right on the Sworn Financial Statement – Part 2

(continued from Part 1)……

Calculating “income from salaries” or “wages” from an hourly wage is not difficult.  Salaries are a fixed amount per year, so divide it by 12 for the monthly amount. “Wages” can be determined by taking the pay per hour multiplied by 40 (hours), multiplied by 52(weeks per year), then divided by 12 (months) gives a monthly gross income. It is the rest of the list that can seem overwhelming and it is easy to feel a sense of doom as you list the many ways you receive money each month.  In your mind is the thought that the more you list, the more will be taken away from you to pay spousal maintenance or used against you to deny an award of spousal maintenance. However, there are some breaks, here. Not all funds received are necessarily part of “gross income”.  The statute also lists what is not “gross income”.

(A) Child support payments received;
(B) Benefits received from means-tested public assistance programs, including but not limited to assistance provided under the Colorado works program, as described in part 7 of article 2 of title 26, C.R.S., supplemental security income, food stamps, and general assistance;
(C) Income from additional jobs that result in the employment of the obligor more than forty hours per week or more than what would otherwise be considered to be full-time employment;
(D) Social security benefits received by the minor children, or on behalf of the minor children, as a result of the death or disability of a stepparent are not to be included as income for the minor children for the determination of child support; and
(E) Earnings or gains on a retirement account, including an IRA, which earnings or gains must not be included as income unless or until a parent takes a distribution from the account. If a distribution from a retirement account may be taken without being subject to an IRS penalty for early distribution and the parent decides not to take the distribution, the court may consider the distribution that could have been taken in determining the parent’s gross income if the parent is not otherwise employed full-time and the retirement account was not received pursuant to the division of marital property.

Completing the Sworn Financial Statement

The language used in this part of the statutes is difficult to interpret—being so much legalese. Clearly, though, the list of funds that are “gross income” is far greater than the list of exempt funds.

The most important exemption from “gross income” for many people is that a second job (or third, or fourth…)—in addition to your 40 hour a week (“full-time”) job–is exempt. So, working a second job to make ends meet or to afford nicer things, will not work against someone by having it considered income when looking at child support or spousal maintenance. Also, overtime work which is often paid at time and a half or more, is only “gross income” if it is mandatory overtime.  If the overtime is optional—meaning you may choose to work it or not—does not get included.  This can make calculating your full-time job income difficult as you subtract out the optional overtime pay from each paycheck, but the effort is worthwhile.

Accuracy of your gross income is important to maintain credibility with the Court. If you appear to be hiding income or “low-balling” your income, the Court may substitute an income it believes you could or should or have been making. If the Court questions credibility on the Sworn Financial Statement, those questions usually carry over into any other representations a Party may make during their case.

Calculating your “gross income” from self-employment is even trickier. The law allows a self-employed individual to deduct business expenses and costs (but not taxes) to arrive at a “gross income”. The problem is many self-employed people don’t really have the ability to know month to month what they will receive or are receiving as income. One solution to a varied monthly income is to look at the last 3 years of tax returns (and a K-1, if applicable) to get an average yearly income. Divide the yearly average by 12 months and this produces an average/estimated monthly gross income from self-employment.

Jeanne M. Wilson - Colorado Springs Divorce Attorney

When working with an attorney it is vitally important that full disclosure is made of all means of fund received every month and year. The attorney can help determine what is and is not income and what must be included in the Sworn Financial Statement. Your credibility is at stake and this will set the course for your entire case as the Court begins to determine your financial future. At the Law Office of Jeanne M. Wilson & Associates, PC, we understand the impact of the Sworn Financial Statement on a divorce or custody case. We take the time to work with our Clients so they not only know their “gross income”, they also understand the implications and consequences of their gross income and how it affects their case.