Child Support and Imputed Income

It is not infrequent for the non-custodial parent to claim an annual income far less than he/she actually earns. In those situations, the courts can impute additional income to the party paying child support. As held by the Appellate Division, Second Department, in Strella v. Ferro, the court “need not rely upon the party’s own account of his or her finances, but may impute income based upon the party’s past income or demonstrated earning potential.” The imputed income can be established in several different ways.

One way to establish that a party’s actual income is higher than his/her reported income is to demonstrate how his/her reported lifestyle could not be supported by the reported income.

In Strella, the father claimed that he had been unemployed and only recently begun to earn $500 per week despite having recently earned as much as $101,000 per year. The Court imputed an income of $96,000 to the father. In doing so, the Appellate Court noted that:

Here, the father’s claimed annual household expenses were approximately double his claimed annual income in 2004 and 2005. Additionally, his financial data did not indicate that he used money from his savings or that he incurred greater debt to pay the remaining amount of his annual expenses not covered by his average annual income. During the relevant period, he did not liquidate any of his investments, he had no outstanding balance on his home equity line of credit, and his credit card statements showed no unpaid balances of a size and nature to correspond to his household expenses.

In Barnett v Ruotolo, the Appellate Division, Second Department, held that in exercising the discretion to impute income to a party, a Support Magistrate is required to provide a clear record of the source from which the income is imputed and the reasons for such imputation. In that case, the father did not testify and chose to rely on the financial documentation he had submitted. The father’s financial documentation indicated that his monthly income was only approximately one-third of his stated monthly expenses, and no evidence was submitted to show that these monthly expenses were not being paid in a timely manner. The Appellate Division held that lower court properly exercised its discretion in imputing income based upon the father’s self-reported financial affidavit for the purpose of calculating his child support obligation.

If the party’s expenses exceed his/her reported income, and there is no obvious diminution of the party’s assets, then the reported income is likely to be under-reported. Under those circumstances, the court should look beyond the filed tax return to calculate the appropriate child support amount.

The court can also impute income by averaging what was reported on most recent individual tax returns. In Y.W., v. T-T.J., the Appellate Division, First Department, reversed a child support order of $3,288 per month and remanded the case back for recalculation of the basic child support obligation. The Appellate Division held that since each party claimed that the income as reflected on the other’s tax return was not accurate, and the parties were unable to produce sufficient evidence to otherwise convince the support magistrate about their respective incomes, the magistrate properly decided to impute income to the parties by averaging what was reported on their most recent (2004 and 2005) individual tax returns.

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