Imputing Income in a Child Support Proceeding
When a divorcing or separating couple has one or more children in common, one parent will be ordered to pay child support to the other parent. This support (as the name implies) is to be used to help offset the costs the recipient parent incurs in raising the child or children. In times past, courts had a great deal of discretion in determining the amount of child support that would be appropriate in any given case; now, thanks to statutory guidelines like the child support guidelines used in Arizona, a court must use a specific formula to calculate the child support to be ordered in any given case. This formula takes into account the income of each parent as well as other factors about the visitation and custody arrangements of the individual parties.
In most cases, the income shown on each party’s paystubs or earning statements will be used to calculate the child support obligation that must be paid. However, in certain circumstances the court may impute income to one parent or the other that is different than the income shown on the party’s paystubs, earning statements, or affidavit.
Defining “Imputed” Income
When one says that a court imputes income to one party or the other, he or she is describing the act of ascribing or assuming that a party has a particular income even if there is no evidence that the party has such income. A court may impute income to another party even if there is evidence that the party does not actually have that income. For example, suppose that Party A produces paystubs for purposes of calculating child support showing that he makes $15,000 per year. If the circumstances and facts are present to support it, a court may impute income to Party A and act as if he or she actually has $25,000 in income. Suppose Party B produces an affidavit and testifies under oath that she is unemployed and has $0 in income. A court may impute income to Party B and treat her as if she was working a 40-hour per week job at minimum wage.
Before a court will impute income to a party, there must be some evidence showing that imputing income is reasonable and justified under the circumstances. A court cannot:
- Impute income simply because it dislikes the particular party. If the court has had previous dealings with Party A (above) and simply does not like Party A, the court may not impute income to Party A for child support purposes.
- Impute income without some credible evidence (preferably objective evidence). The court may not impute income to Party A simply because the other party says Party A is misrepresenting his or her true income. While such a statement may warrant further investigation by the court, this statement, standing alone, is insufficient for the court to impute income.
- Impute income where doing so would not be reasonable or justified. Suppose Party A has significant mental and/or physical impairments that limit his or her ability to take on a higher-paying job that would carry with it more responsibilities. Even if another employee in a similar situation as Party A would be making $25,000 per year, this would not be sufficient to impute the same income to Party A.
Imputing income always involves adding more income to the party’s reported income: the term is never used to describe the situation of reducing the reported income of a party. (Not only is there no accepted term for the practice, a court would rarely – if ever – reduce the amount of income reported by a party for purposes of calculating child support.) Moreover, imputing income does not refer to the practice of some courts wherein they enter an amount of child support that is either higher or lower than the amount of child support called for by the formula and guidelines. These deviations are entered because the court has found some evidence or reason to believe that the presumptive child support amount is not a fair and appropriate amount to order in a particular case. This could be because one party has significant medical needs and costs or because the custodial parent of the child would be left impoverished due to child-related expenses if a deviation were not entered.
Imputing Income Where There is None
Just because a party reports that he or she is not working does not mean that the court will not impute income and that he or she can escape a child support obligation. In situations of unemployment, either temporarily or long-term, the court can impute income to the unemployed party. At a bare minimum, the court is likely to calculate child support and treat the unemployed party as if he or she was working a 40-hour-per-week job making minimum wage. If the unemployed party has no means of meeting this obligation, the obligation will continue to accrue. This can lead to a judgment and/or garnishment order being entered against the obligor party that will act to intercept any tax refunds, inheritance monies, insurance proceeds, or certain other assets or income the unemployed party may come into possession of in the future.
The court does not have to impute income to an unemployed party at this level, though. A court may choose to impute a higher income level to the unemployed party when the court finds that the party’s unemployment is due to the obligor party’s own deliberate acts. Suppose Party A makes $50,000 per year and he has one child in common with Party B. Party A and Party B are locked in a vicious child custody battle in which each party wants sole custody of their child. After a long custody hearing, the court gives Party B primary custody of the child and Party A is given limited visitation. This order would typically be followed by an order obliging Party A to pay child support to Party B. Suppose for purposes of this example that Party A, enraged that he lost the custody battle, decides to quit his job so that Party B will get little, if any, child support. A court that becomes aware of this deliberate act to make oneself unemployed can treat Party A as if he was making $50,000 and calculate child support accordingly.
A court is likely to impute income to one spouse who attests or shows he or she has no income in cases of:
- Involuntary unemployment, where the party has been laid off or otherwise terminated from a position through no fault of the party him- or herself.
- Voluntary unemployment, where the party has taken some action that has resulted in the termination of his or her employment. Income will be imputed even if the party’s termination from his or her job was due to a careless or accidental act.
- Falsification of records can lead to the imputation of income if a party attests he or she has no income but other evidence reveals this to be a false attestation (this can lead to criminal charges such as perjury and/or subject the party to the contempt powers of the court).
Imputing Income Where There is Some Income
In a similar way, a court may impute more income to a party than what the party’s financial records show. This is typically done where the party has taken some affirmative action has led to a reduction in the party’s income. This may include:
- Refusing to work a full-time shift for no reason;
- Voluntarily being “demoted” either by unreasonably taking a lower-paying position for the purpose of reducing one’s child support obligation or unreasonably refusing to take a promotion;
- Hiding other sources of income from the court.
Hiding income sources from the court is never a good idea: not only will the court impute the income to the party once the additional income has been discovered but this act may be considered a contemptable act and result in the party being fined and/or jailed.
When a party has voluntarily reduced his or her income, however, a court does not automatically impute additional income to that party. Instead, the court will give the party an opportunity to explain why he or she took the pay reduction and determine whether such an action was reasonable. If a court finds such an act to be reasonable under the circumstances, a court may decline to impute income to that party. For instance, suppose Party A was making $35,000 and received an offer for a promotion to $50,000. Party A, however, turned down the promotion and chose to remain at his or her present position. If a court does not find this to be a reasonable decision, the court may impute the additional $15,000 to Part A for child support purposes. However, suppose that Party A explains that the promotion would have required her to move from Arizona to Florida and she was afraid this would negatively impact her ability to exercise visitation time with the child and prevent her from remaining involved in her child’s life. Under these circumstances, the court is likely to find that Party A’s decision not to take the promotion was reasonable and will not impute the additional income to Party A.
Tips for Avoiding Imputation of Income
As a party in a child-related proceeding, the court will expect that, if you are determined to be a noncustodial parent, that you will pay the other parent child support. To avoid paying more than you would otherwise have to, consider these tips:
- Always be honest with the court. Hiding income sources or underreporting income is never acceptable and will almost always cause your situation to be worse. Even if you are somehow successful at misrepresenting your income for years, when the fraud comes to light the court can increase your child support obligation retroactively.
- Be prepared to explain bonuses or unreliable income. Your boss can be a valuable witness for this purpose. If your boss explains to the court that you receive a bonus in some years and not in others, you may be able to avoid having the court impute your bonuses into your income. Similarly, if you were laid off or work during some seasons and not others, having your boss explain this and the reasons for it to the court can provide the court with sufficient evidence to refuse to impute income to you.
- Always support your income statements with objective evidence. When you inform the court that you make a certain amount of money, be sure that you are able to point to a paystub, earning statement, or other objective piece of evidence that supports this contention. Nothing arouses a court’s suspicions more than a party who says he or she makes $25,000 per year but produces a tax return showing his or her income to be $75,000. Be certain to bring objective evidence of your actual income and evidence that explains any discrepancy between one document and another to the court. Find out more about imputing income in a child support proceeding by calling or emailing the attorneys at Reppucci & Roeder, PLLC.