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Income from self employment - how to determine CS?

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  • #16
    Your best bet is to work with him, as was pointed out, the small gain you may receive most likely will not out weigh the costs you would incur as a result of going to trail. Even if he said things to you, does it mean it is true?

    Have you tried discussing this with him, and asking for proper disclosure?

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    • #17
      It is absolutely true. He was not lying to me, on this I would stake a lot.

      I have tried discussing, as I already mentioned. I am not completely sure at this point what to ask for in terms of proper disclosure? Like what terms/forms/information do I specifically ask for from him?

      As I mentioned he is very eager to avoid court, but also would like to avoid giving me any detailed information.

      I would like to find out what exactly to ask for, and then tell him either give me this information or call to start mediation. Then in the mediation process I can ask for this stuff. If that doesn't work I will move on to a legal process. I just dont want to go right to the legal route now, because if I serve him with legal documents wherein I say he is making bogus expense claims, he is going to flip out. I want to give him every opportunity to avoid that, but my basic position is that your child support comes out of the income you had before, not after, you flew all over hell's half acre for 'spiritual retreats.'

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      • #18
        My ex was/is self-employed. He lied about his income and paid his wife money from the company. It was determined he was income-splitting for the purposes of hiding income that should have been attributed to him. Further, it was decided at Trial that his wife played no role (meaningful or other) in said business.

        In the end, a review of the disclosure we did in fact have showed a very clear pattern of their monthly spending. We could not count on his sworn Financial Stmt b/c it was one big lie, but by calculating his/their monthly expenditures (and they were high and largely frivolous) he was imputed an income and the CS/SS was determined according to that amount.

        IE: it was clearly established that the monthly spending was 8K. 8x12 is 96K.

        Edit: *Most* self employed ppl bs about their income and expenses ALL the time.
        Last edited by hadenough; 01-31-2013, 07:07 PM.

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        • #19
          Wow that is incredible, hadenough!

          So, what process did you have to follow? Did you have to hire accountants etc? Or did you ask for disclosure, he had to provide it, and based on your evidence that income was imputed to him?

          I am trying to figure out how the process would go and whether it would indeed be out of my reach financially. As I mentioned I can get legal aid, but my income is quite low and I do not have finances to be hiring extensive accounting.

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          • #20
            Go have a chat w/duty counsel or see if you can swing a n/c consult with a Lawyer. We went to Trial. The full 9 yards.

            He needs to complete a Financial Statement and so do you. Tell me, just out of curiousity - about how much do you 'think' he earns after legit business expenses? Do you know what his rent/mortgage pymts are, and other basic expenses? Car/Truck pymt/lease?

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            • #21
              Electra: I think you are wise to look into many things before you start any legal action. It is incumbent upon you to read as much as you can on Child Support, Separation Agreement and be sure to think about preparing a will. This forum has thousands of posts which are free to read. It will be quite overwhelming at first but just consider it like one of the courses you are studying - there is an end in sight.

              If you can avoid litigation (going to court) that would, of course, be the very best thing. Once you have educated yourself on the subject you might be successful in simply meeting with the father and working out an agreement between yourselves. That would save lots of time and money. If you can do this be sure to get an agreement reviewed by a lawyer. It might be useful to familiar yourself with the maintenance enforcement regulations of your home province. Some people prefer to have the CS payments enforced by MEP/FRO, others do not.

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              • #22
                Also: search CanLII

                Select your province and enter search terms for self-employed, imputed income. You'll get some helpful information on there and (as arabian stated) going through some of the threads/posts on this forum.

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                • #23
                  I dont know what he earns after legitimate expenses. Given that he verbally told me he earned 100,000 in 2012, and he says after expenses it will be more like 60,000, I am thinking that at least half his expense claims would be added back for the purposes of child support. His legitimate business expenses that I can think of:

                  mortgage - 1200/month I believe - I assume he can claim a percentage for his office, but not the entire mortgage payment? His office is maybe 1/6th of his residence, or less (probably much less actually).

                  utilities

                  business telephone line

                  yellow pages advertising (I believe this is pretty expensive)

                  high speed internet

                  website maintenance, development, and host fees

                  minimal long distance, minimal paperclips - he does not have a heavy administrative component

                  very occasional business lunches

                  possible travel - there is a retreat related to his work, but even that is at a resort in a tropical location. That is the only possibly legitimate travel I can conceive of. It would be several thousand dollars btw transportation, lodging, and fees though if legit. I can't remember offhand if he attended this in 2012.

                  He does not own a vehicle. He often rents vehicles but rarely for legitimate business use.

                  Housecleaners - they clean his whole house including his office, once every two weeks.

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                  • #24
                    Originally posted by hadenough View Post
                    Also: search CanLII

                    Select your province and enter search terms for self-employed, imputed income. You'll get some helpful information on there and (as arabian stated) going through some of the threads/posts on this forum.
                    Thank you both! I have already looked at some of the posts here and found much useful information. I appreciate it.

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                    • #25
                      To get a better understanding of business expenses you may want to look at the CRA website as well, because for his business use of home expenses, there are certain calculations that are used. Knowing the allowable deductions by CRA, will also give you a full list of potential expenses that can be added back for child support purposes.

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                      • #26
                        Thank you, I will look at that for sure.

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                        • #27
                          Was he in this same line of work when you were together? What did his income taxes look like from THAT period of time?

                          As has been mentioned, 60K net on 100K gross is NOT unreasonable, and you are looking at comparatively little monetary gain in requiring an audit.

                          You can request full financial disclosure, he should be provided his full return as well as his business' return (if he filed it separately).

                          I would not push this too far, if you try for an actual audit, you could be on the hook for 10-15K. Legal aid will not cover that.

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                          • #28
                            @hadenough. I am in the process of starting legal procedures as I half proof that my self-employed ex-wife is hiding income. You said you went the full 9 yards. from the time you went to a lawyer and then to court and then to a decision, how long was that? and can I ask what the total cost you paid? I am in this for the long haul as it's worth fighting for what is right, but I just want to know what I'm in for the next few months or years maybe??? and how much this will drain my pocket. any input is fine. thanks.

                            elektra, good luck with your battle, I'm in the same position.

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                            • #29
                              Honestly, I am not sure if it would be worth it to pursue that. While he might say that he claimed all that expenses and if he is not that accounting savy as you mentioned, maybe he did not claim anything unreasonable?

                              if his financial statements are preapred by an accountant, all expenses realted to his home are pooled together ( utilities, interest on mortgage, cleaning etc) and % corresponding to square footage of the home office is applied to those. If the retreat yu are refering too is for a conference or anything related to his work, it is a legitimate expense. if he dines out with the clients, it is a legitimate expense, you will have to work really hard to prove that 100$ lunch is not for business purposes.

                              if you knew that the difference is in 100's of tousands, then it would be worth it to go through all the trouble. But that is my opinion. Just think how much would your child support amount go up, if it is found that maybe $10,000 of the expenses were not legitimate. And then think, how much in legal, accounting fees you would pay to prove that, and how much your relationship with your child's father will be affected. Think about effects of that on your child, and then decide if it is worth it. Take a close look at the guidelines and you will see that the amounts do not change that quickly.

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                              • #30
                                I disagree. You have to draw the line somewhere. My ex would have loved to claim his Scottsdale golf trips and trips to Vegas (equipment trade show) as business expenses for determining SS. Judge most definitely did not allow, nor did the judge allow home use for business office. We let him claim his vehicle expenses and cell phone. Meals or entertainment was definitely not allowed. All receipts had to be original copies and directly related to operation of his business. How he files his annual income tax return is of little relevance - rather just an amusement factor in my situation.

                                Comment

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