Child Support – Ex has personal income and sole ownership of a corporation

[newcomer]

I share joint custody of 2 children with my ex. We each pay child support in proportion to our incomes.

His lawyer has sent a letter asking to reduce child support payments based a draft of his personal tax return that shows his income as having reduced by $25k. His income remains higher than mine. The income on this draft shows his income a business income rather than employment income. This is not a final return and appears to be incomplete. I am concerned about the accuracy of what is shown on the return.

What documentation am I entitled to - to verify his income?
How should I respond to his request?

He is the sole owner of a corporation also, but I do not have income information about that.

Am I entitled to get information on that from him?
What information documentation should I request? Financial statements? Tax assessment?
If so is this information considered in the child support calculations?

The other issue is the shared custody. In fact I have had the children for about 75% of the time in the past year. My ex has recently married and the family lives outside Canada. He frequently travels there and is not available for the normal alternate weeks custody.

Should I continue to pay him child support in this case?

[phoenix]

Well, I'm not an expert, but when I was dealing with my ex in the court system last year I was entitled to copies of:

--the past 3 years of tax returns
--the past 3 years of ALL bank statements for all bank accounts legally in his name
--the past 3 years of credit card statements for all credit cards
--his most recent pay stub
--his most recent T4

[FL_Needs_To_Change]

I do not think that any one is entitled to banking statements or credit card statements as the method one chooses to spend or save money is not under review, only their forms of income.
So you are entitled to the last three years of tax assessments, and any returns including the T-4's or any other supporting documentation provided to the CCRA to support the tax return.
Recent pay stubs, but I suspect if he owns the company he does not have any stubs only transfers to accounts.
I would ask for his business records. I do not know exactly what the name of the records are, but they show the inflow and payment history for the business, including ALL employee wages/salaries. This must be accurate as they can be requested by the CCRA to ensure that no fraudulent activity is going on within the company. So basically anything that the CCRA is entitled to, to prove income, you are also entitled to, to prove income, for the purpose of determining support.

This link to a case, is "similar" to yours. http://www.canlii.org/en/nt/ntsc/doc...05nwtsc95.html
The paying parent "started" a business which resulted in an initial lower income, but estimated the income it to increase.
An excerpt, that basically shows that unless one can conclusively prove income by way of CCRA documentation then CS would not change. But once proof was provided, then a review of the CS amount would be entertained by the court.


[19] With respect to the May 2005 change of employment, (as described by the father), one naturally questions the reasonableness of such a decision by a parent with substantial child support obligations, i.e., knowingly reducing his capacity to meet his children’s current needs on the basis that the children’s “long term financial stability” will return to the current level “several years” from now.

[20] In his September 2005 affidavit, the father purports to set out the income for his new business for its first two months of operations, i.e., June 2005 and July 2005. This information is incomplete and unsatisfactory for purposes of establishing his income under the Federal Child Support Guidelines. For example, even on his own figures, he understates his monthly net income by at least $1250.00.

[21] It is on this evidence, or lack of evidence - no 2004 tax return, no evidence of employment income from the Government of the Northwest Territories from January 1, 2005 to May 31, 2005, incomplete information on new business income - that the father asks the Court to reduce his income for purposes of the child support guidelines from an agreed income of $55,500 in March 2005 to an arbitrary, speculative income of $35,000, with a corresponding reduction of child support for his children. He submits that he should pay child support now based on the speculative lower income level of $35,000, and if and when proper financial statements are completed, to then adjust the level of child support obligations. In my respectful view, the opposite ought to happen. He ought to continue to pay child support at the level he had the capacity to when he was gainfully employed by the Government of the Northwest Territories until such time as he satisfies the Court, on credible evidence, that his income has been indeed reduced, and that it has done so as a result of a reasonable decision made by him as a parent.[/SIZE]

[phoenix]

Receiving my ex's bank statements and credit card statements made ALL THE DIFFERENCE in uncovering that he was fudging his income. Bank statements and credit card statements are very important. I strongly urge, especially if your ex is self-employed, to get a hold of those documents! My ex had a $45K difference when it came to what he "said" he was earning, and what was actually going in and out of his bank account, and what he was spending his money on with his credit cards.

[FL_Needs_To_Change]

We were asked in an affidavit application to the court to forfeit our banking info and any credit card info and the judge we had unequivocally denied the ex's request for these as it was a clear violation of privacy and she siad that how we utilized our income was none of the ex's business. She had the last 5 years of CCRA notices of assessment complete with T4's etc.

However, if you can get a judge to order the release of this info, you are defiantly at a huge advantage.
I personally still feel that this is a violation, and as long as a person provides all government assessments (which I might add if you fraudulently file will come back to bite you harder than any ex may be capable of), then you have all that is required to calculate CS etc. Since these are legal binding documents.

[phoenix]

Are you self-employed FL? If so, I'm totally surprised you wouldn't have to turn over your bank statements... I know PLENTY of people who get cash bonuses, etc... and the only way for that kind of income to show up is in the bank account or in the spending habits... hence the statements. Certinaly if you are on a fixed salary, then I would agree that how you spend your money is your own private business. However, if somebody is receiving EXTRA money under the table, the children are entitled to child support based on the complete income, not the jus the "total" that only shows up on the T4. Sometimes looking at the bank statements and the credit card statements is the only way to see if the person's income is true or not.

As I said, in my situation it made a HUGE difference because my ex's T4's did not accurately portray his true income.

newcomer, I strongly URGE you to request the bank statements and credit card statements. You have nothing to lose by asking. My judge certainly allowed it. My ex tried to drag his heels about it, and the judge even fined him for wasting everyone's time when he took too long turning over the statements!

[jankes71]

I recently had the same issues with my ex who owns his own business and sought advice on here, as well as seeing a lawyer about the same. A business owner can T4 themselves any income they want for the purposes of income tax, which is perfectly legal. However, any expenses they incur are also considered income, which is not usually reflected on their T4. My lawyer advised me to get copies of his personal income tax, as well as the business income tax. The credit cards are also necessary to show spending expenses, as any businees expenses are shown on these. A personal income tax may not reflect this, which is why you need copies of the business income tax as well, as this accurately shows the income going through the business, where the personal only shows what they paid themself.
You do need the credit cards for the business so you can see the expenses incurred.
A judge does not look kindly on someone who purposefully retains a lower income for the sake of paying a lesser child support amount according to the tables.

[billm]

A business owner can T4 themselves any income they want for the purposes of income tax, which is perfectly legal. However, any expenses they incur are also considered income, which is not usually reflected on their T4.

Don't agree with this. If you run a business, you can't legally report any income you want on your T4, you have to report what you actually paid yourself, which is money you received from the company for personal use that is not business related.

Also 'any expenses they incur are also considered income' is not true. If I am a painter, then the paint I buy is a business expense and certainly is not considered income. If one buys anything because of the business that they would not otherwise buy, then it is a legit business expense and is not income and the CRA agrees!

[jankes71]

Yes, if you buy supplies, that is a business expense, but there are other things like trips, leases, lunches that are business expenses, but are also income from the business.
My ex chooses to draw a lower wage for income tax purposes, even though the wage he could pay himself, that the business can afford is much higher, he chooses to retain the money in the business, but he has to show that he has a game plan for retaining the money in the business, meaning there is a solid business plan for the income he doesn't draw.

[dadtotheend]

The common addbacks to reported self-employment income that appears on a sole proprietor or partner's income tax return are:

-home office expenses
-some or all of vehicle deductions
-meals/entertainment