Determining child support for self-employment in Oklahoma can be more complex than for those earning traditional wages. Since self-employed individuals often have variable income, tax deductions, and business expenses, calculating their financial obligations requires a detailed examination of their finances. Oklahoma’s child support guidelines aim to ensure that children receive appropriate financial support, regardless of the parent’s employment type.
Oklahoma’s Child Support Guidelines
Oklahoma uses the income shares model to calculate child support, which estimates the financial contribution that both parents would have made if they lived together. This model takes into account the gross income of both parents and the number of children being supported.
For self-employed parents, determining gross income can be challenging due to the nature of their income streams and expenses. Independent contract work can be especially difficult to gauge due to the person not operating under an Employer Identification Number, or EIN.
Determining Gross Income for Self-Employed Parents
The court defines gross income as income from any source, including wages, salaries, commissions, and business income. For self-employed parents, gross income is calculated as:
Gross Receipts – Ordinary and Necessary Business Expenses = Gross Income
Gross receipts include all income generated by the parent’s business, whether from services, sales, or other activities. Ordinary and necessary business expenses include costs essential to running the business, such as:
- Rent for office or workspace
- Utilities
- Employee wages
- Equipment and supplies
The court closely examines claimed expenses to ensure they are legitimate and not excessive or personal in nature.
Common Challenges in Calculating Income
There are a few common challenges when it comes to calculating income for self-employed parents.
a. Income Variability
Self-employed parents often have fluctuating income due to seasonal work, market conditions, or inconsistent client payments. To account for this variability, the court may:
- Use an average income based on recent tax returns and financial statements.
- Consider income trends over a 12-month period or longer.
b. Tax Deductions
Self-employed individuals can deduct many expenses on their tax returns, but not all deductions reduce income for child support purposes. For example:
- Personal expenses claimed as business deductions may count towards income.
- Depreciation and other non-cash expenses are often excluded from deductions when calculating child support.
c. Hidden Income
Courts are vigilant for attempts to underreport income or inflate business expenses. To ensure accurate calculations, the court may review:
- Tax returns (personal and business)
- Profit and loss statements
- Bank records
- Invoices and receipts
Parents who fail to disclose their full income risk penalties and court-imposed adjustments.
Imputed Income for Self-Employed Parents
If the court determines that a self-employed parent is intentionally underreporting income or earning less than their capacity, it may impute income. This is an amount the court assigns based on:
- The parent’s earning potential
- The parent’s education, experience, and skills
- The local job market and available opportunities
For example, if a self-employed parent claims minimal income but appears to have the ability to earn more, the court may calculate child support based on their potential income rather than reported earnings.
Modifying Child Support for Self-Employed Parents
Self-employed parents experiencing significant changes in income can request a modification of child support. To do so, the parent must demonstrate a substantial and continuing change in circumstances, such as:
- A significant decrease in business revenue
- Closure of the business
- Increased business expenses
The court will review updated financial records to determine whether a modification is warranted.
Tulsa County Family Attorneys
Child support calculations for self-employment in Oklahoma require a thorough analysis of income, expenses, and financial records. While self-employment adds complexity to the process, Oklahoma courts work to ensure fair and accurate support orders that prioritize the child’s best interests.
If you are a self-employed parent involved in a child support case, contact us today at Tulsa Divorce Attorneys & Associates by calling 539-302-0303 or contact us online.