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Hi, and welcome to Family Law Matters. I’m Dr. Michael Mantell, privileged always to be joining Bonnie Rabinovitch-Mantel, owner and managing partner of the Primus Family Law Group, a family-oriented firm where experience meets results. Hi, Bonnie.
Hi, Michael. You know, and just to remind everybody, you and I are not related, even though we share a similar last name. That’s right, because I spell my name correctly with two L’s, and you’re in a hurry, so you only have one L. I don’t know why, but whatever.
Okay, Bonnie, speaking of saving time and saving and saving and saving, look at that book. I want to talk to you today about the financial issues involved in divorce, particularly for people who are self-employed, because the impact on someone who’s self-employed, who deducts this, saves this, and deducts this, and deducts this, sometimes they’re surprised when they go to court, and they find out that those deductions aren’t going to help them show a lower income to share. Talk a little bit about that for us.
Well, you know, Michael, most of us have a W-2, right? We get wages, and it’s specifically outlined exactly what we get, what’s our gross income, because support, for all of you out there, is based on your gross income, not net income. So we know what a W-2 employee makes, easy peasy. When it comes to self-employed individuals, that’s a little bit more complicated, because we are allowed by the IRS to deduct things from our self-employment income.
We’re allowed to deduct depreciation, we’re allowed to deduct, you know, certain portions of meal, entertainment, travel, car expenses. Unfortunately, when you go to court, and you’re determining child and spousal support, a lot of those deductions are not allowed in family court. They are actually added back to your bottom line income to come up with a proper gross income.
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And so a lot of people think, you know, well, my tax return, you know, my tax return, that’s allowed for the IRS. So you’re not doing anything wrong. But when you go to family court, they only deduct certain hard expenses that are normalized for all self-employment individuals.
And so people do get, well, not if they’re working with Primus, because we explain that to them before they go to court. Often people will get a rude awakening, like, wait, wait, my, you know, bottom line is 40. But when they get to court, it looks more like 100, depending what they’ve run through their business.
The other thing that’s nice, that can be nice about self-employed individuals, is the court will take an average, because when you’re self-employed, every year depends on your effort, what’s going on in the market. So they will consider an average of either three or five years to figure out what your general overall ongoing income is. Very interesting.
So if you are the spouse of someone who’s self-employed, an attorney or, you know, has his or her own business, whatever it may be, and you say, well, they earn $145,000 a year, there are deductions that the court will allow. And the person who wants to share that $145,000 has to understand there are deductions, right? And that’s understood. The person who says, yeah, but to run the business, you know, I spend, you know, $70,000.
Divorce court says, no, sorry, that doesn’t apply in divorce court. It depends. Like, I’ll give you a perfect example.
Somebody who’s got rental properties, the management expense that they pay to somebody to manage those properties is a valid expense. It’s a valid business expense. The court will allow it.
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If you just, if you, as part of your marketing strategies, take your potential buildings, you know, the management of the buildings, golfing every weekend, that may not be a valid expense for family court. I get it. Okay.
But sometimes your job, I guess, is to help the spouse understand that, sorry, the government says it’s okay, but divorce judges won’t. Exactly. I got it.
Well, if people have questions about this, how can they reach you and get some more information about this? You can reach us at 619-574-8000. We offer a free 30 minute phone consultation. So call us and we’ll get you on my calendar or you can reach us at www.PrimusFamilyLaw.com. There’s an info sheet you can fill out and we’ll get right back to you.
Terrific. Wonderful. Another informative Family Law Matters.
As always, Bonnie, thanks so much. Have a great day, Michael. You too, dear.
Bye-bye.