In the last blog we discussed child support and how it is calculated. The basis of all calculations is the gross income of both parties. Income is defined as the actual gross income (the pre-tax, and pre-deduction income) of the parent or the potential income of the parent.
The definition of gross income is fairly extensive and includes income from any source. Such as salaries, commissions, independent contractor income, bonuses, dividends, severance pay, pensions and retirement benefits, royalties, rents, interest, trust income, annuities, capital gains, and any monies drawn by a self-employed individual for personal use. Gross income also includes Social Security benefits, workers’ compensation benefits, unemployment, and disability, funds paid from any health, insurance, monetary gifts, income from partnerships, alimony or maintenance payments; and expense reimbursements or in-kind payments (like a company car).
A common area of dispute over what constitutes “income” is whether to include overtime. Overtime pay is considered in gross income unless the overtime is not a requirement by the employer as a condition of the employment. For example, Parent A works 40 hours a week Monday through Friday. Parent A volunteers to pick up an extra shift on Saturday because a fellow employee is out for the day. The extra shift, and its pay, would not be factored into gross income, because it is not a requirement of Parent A’s regular job. Parent B works four 12-hour shifts as required by her employer. The 8 hours of overtime are required and its pay would be factored into gross income.
Gross income does not include any benefits from means-tested public assistance programs, including assistance under the Colorado Works Program, Supplemental Security Income, and food stamps. Neither does it include any income a parent may receive on behalf of their children such as child support payments, and Social Security benefits received by a minor child as a result of death or disability of a stepparent. Gross income also does not include earnings or gains on retirements accounts, , unless a parent takes a distribution from the account. Gross income does not include income from a new spouse absent special circumstances.
A person is not required to work more than one full time job, so money from additional jobs that result in a parent being employed more than 40 hours per week is not included. For example: Parent C works full time Monday through Friday at 40 hours per week, and has a part-time job on the weekends, working 8 hours. The income earned from Parent C’s part-time weekend job would not be considered for gross income.
Gross income may also be determined for a parent who is unemployed or underemployed. The Court can look at a parent’s potential income rather than their actual income. This is called imputed income, and it is used when the Court finds that a parent has the ability to work, and is voluntarily choosing to not to do so. To impute income, the Court looks at the unemployed or underemployed parent’s past history of employment, education, physical and mental health, and any efforts the parent has made in seeking employment. However, there are exceptions to imputations of income as well. The Court will not impute income to a parent who is mentally or physically incapacitate or who is the primary caretaker for the parties’ minor child under the age of 30 months, or for a parent that is incarcerated for at least one year.
Because there are so many different factors to consider when calculating income, it is always good to check with an attorney to review the facts of your case. The attorneys at Jorgensen, Brownell and Pepin can assist you.