In Oklahoma, support obligations are set according to a statutory formula. The statutory amount is determined by adding the adjusted gross income of the parties, and is presumed to be correct. As there is no deviation from the guidelines unless it is shown to be unjust, unreasonable, inappropriate or inequitable, what is considered “income” when determiningadjusted gross income becomes very important for a self-employed parent.
Income for the purpose of calculating child support includes earned income and passive income. Earned income has been defined by the Oklahoma legislature as income received from the labor or sale of goods or services. This includes salaries, wages, tips, commissions, bonuses, etc. Passive income is defined as income such as dividends, pensions, rents, interest income, support from someone other than a parent in the case, annuities, Social Security benefits, workers’ compensation, gambling winnings, and other income of this nature (the list of types of income is not limited to those specifically set forth in the statute). Earned income and passive income are easier to quantify because they have either a greater degree of certainty for future payments or they were of a limited, fixed nature.
Self –employment income is defined as “income from, but not limited to, business operations, work as an independent contractor or consultant, sales of goods or services, and rental properties, less ordinary and reasonable expenses” The problem lies not so much in the amounts received from these activities, but the court’s review of what expenses are ordinary and necessary for the employment or operation of the business. The court is also directed by statute the IRS deductions used for calculating expenses is NOT controlling on the court. Therefore, you have a laundry list of expenses that may be deductable for tax purposes and not for the purpose of calculating gross income for child support.
As a modification of support can only be attained upon a showing of a significant change of circumstances (there are other limited circumstances, typically reflecting a defect in the original award), it is crucial to correctly calculate the gross self-employment income before the initial award. If you are self-employed and have questions regarding calculating gross or adjusted gross income in Oklahoma, please feel free to contact our office for a consultation with one of our experienced family law attorneys.