Overview of Child Support in New Jersey
In New Jersey, both parents are obligated to support their children financially. Child support is determined by the state's guidelines, which consider income from all sources. This includes wages from employment, as well as income generated by self-employment. Self-employed parents often face unique challenges when it comes to determining and providing child support, as their income can be less predictable and more difficult to document than that of traditionally employed individuals.
Income Determination for Self-Employed Parents
For self-employed parents, calculating child support starts with determining 'net income.' Net income for the self-employed is business revenue minus necessary and reasonable business expenses. However, New Jersey courts are vigilant about ensuring that a parent's reported income reflects their true earning capacity. Items such as personal expenses paid through the business or depreciation on equipment may be added back into a parent's income for support purposes.
It is crucial for self-employed parents to maintain meticulous financial records. In the event of a dispute over income, courts may rely on tax returns, bank statements, invoices, and receipts to ascertain an accurate picture of a parent's financial status.
The Self-Employment Tax Adjustment
When calculating child support, New Jersey law allows self-employed parents to deduct half of the self-employment tax they pay when determining net income. This adjustment acknowledges that self-employed individuals must pay both the employee and employer portion of Social Security and Medicare taxes.
Modification of Child Support
Because the income of self-employed individuals can fluctuate significantly, either parent can request a modification of child support if there is a substantial change in circumstances. For instance, if a self-employed parent experiences a significant downturn in business, they may petition the court for a reduction in support payments.
Conversely, if there is evidence that a self-employed parent's business is thriving and their income has increased substantially since the last determination, the other parent may seek an increase in child support payments.
Enforcing child support orders for self-employed individuals can present hurdles. Since these parents do not have an employer who can withhold support directly from a paycheck, they must be diligent about making regular payments. Failure to do so can result in enforcement actions like seizure of bank accounts or professional licenses.
Historical Context and Examples
In the past, self-employed parents might have been able to under-report their earnings more easily than today due to less stringent oversight. However, modern advancements in financial tracking and more rigorous enforcement mechanisms have reduced this occurrence significantly.
For example, in Burns v. Edwards, the New Jersey court emphasized that self-employment income should be carefully reviewed to ensure an accurate representation of a parent's earnings. The court took into account not only reported income but also perks or benefits that effectively increase one's spending power.
Tips for Self-Employed Parents Navigating Child Support
- Maintain transparent and comprehensive financial records.
- Consider hiring an accountant who specializes in self-employment to assist with documenting legitimate business expenses.
- Be proactive about seeking modifications to child support orders when your financial situation changes significantly.
- Understand that courts will aim to preserve the best interests of your children above all else.