In North Carolina, as in most states, what is included in gross income for purposes of calculating child support is all encompassing. It includes all gross income, not net of taxes and not net of 401(k) contributions or health savings account deductions. Even if your spouse is a W-2 employees, which makes it easier to determine gross income, you cannot rely on line one of your tax return to determine a spouse’s gross income. When it comes to the self-employed or someone who is in an S-Corp or partnership, determining “gross income” get’s even more complicated because their income is usually not reflected on a W-2, or at least not all of it. These individuals also get distributions of profit and profit is after “business” tax deductions. Some tax deductions are not legitimate tax deductions and/or should be characterized as personal expenses, which get added to their income. Depreciation, which reduces taxable income, is not an out-of-pocket expense, so it has to be added back. The list goes on.
Analyzing gross income requires analyzing all types of documents such as the tax return (Form 1040), W-2s, the last paystub for the year, K-1s, the business tax return, the operating agreement, bank and credit card statements, the profit and loss statement and even the general ledger.
If you are curious as to what the NC Child Support Guidelines include as income, here is a link: https://ncchildsupport.ncdhhs.gov/ecoa/cseGuideLineDetails.htm
I encourage you to seek out a Certified Divorce Financial Analyst such as myself who can thoroughly review and analyze the relevant documents to determine the correct amount of gross income so that you can receive the correct amount of child support.
