What to Watch for When Divorcing a Self-Employed Spouse

 Posted on January 27,2020 in Divorce

Divorce has long involved people who are self-employed, such as business owners. Today, more people are making a living as independent contractors and freelancers, which is also self-employment. Having a spouse who is self-employed makes it more difficult to identify their income and properties for the purpose of divorce. This information is necessary when calculating spousal maintenance and child support. If you are divorcing someone who is self-employed, you need to be thorough in collecting and evaluating their financial records to make sure they are not hiding anything from you. 

Collecting Information

When your spouse is employed by another person or business, their tax returns should accurately show their income because their employer is reporting it to the IRS. People who are self-employed are responsible for reporting their own income for tax purposes, which means that they could potentially underreport their income. You need to piece together your spouse’s various income sources by requesting:

• Records of their business income, assets, expenses, and debts
• Statements from bank accounts related to their business
• Receipts from payments they received for freelance or contract work

Some people do freelance work in addition to being employed by a business. Make sure you ask for your spouse’s income records for side jobs, such as driving for a ride-share company.

Evaluation

Once you obtain your spouse’s business and income records, you must evaluate whether they are accurate. You may have a general idea about how much money your spouse makes based on their expenditures. Tell your divorce lawyer if your spouse’s reported income seems too low. You will need your spouse’s business and income records for the past several years to do an accurate assessment. Your spouse could be artificially deflating their income by taking on less work this year. Previous years will show their typical earning capacity and that they may be capable of bringing in a greater income.

If your spouse owns a business, you need to do a thorough business valuation to:

• Confirm the actual value of the business and its assets
• Determine whether any of the business assets are marital properties
• Make sure that your spouse is not using the business to hide assets

Contact a Kane County Divorce Lawyer

Analyzing the financial records of a self-employed spouse may require the skill of a forensic accountant. A St. Charles, Illinois, divorce attorney at Goostree Law Group will work with whichever financial professional you need to ensure that you are getting a clear picture of your spouse’s finances. To schedule a free consultation, call 630-584-4800.

Source:

http://www.ilga.gov/legislation/ilcs/documents/075000050k503.htm