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Custody & Support Modifications

Self-Employment Income Is Included in Child Support Figures

Many of the wealthiest residents of Los Angeles and the rest of Southern California are so precisely because they are self-employed. While many people who go into business for themselves have a rough go with it at the outset, once a business takes off and succeeds, a Californian can do very well indeed.

As is the case with parents who work for a company as employees, California law adheres to the view that children are entitled to share some of their parents' good fortune. At a minimum, parents must meet their children's basic needs for food, clothing, shelter, medical care and education. Additionally, a child is supposed to, to some extent, share in his or her parent's standard of living.

A child should not be in a home that is barely scraping by while the child's other parent is making a mint through his or her own business. For this reason, all self-employment income is supposed to be counted as income for child support purposes.

The starting point for this calculation is the parent's Schedule C and other tax return documents. However, the court will not simply assume that what is on the tax return is appropriate for child support purposes. For instance, the court may not calculate certain deductions when figuring child support even though they were allowed under the tax laws.

It is important for a parent to keep close tabs on how the other parent is faring in his or her own business and why he or she is faring so. Many times, it may be necessary to modify support as a person's business grows. On the other hand, a parent also needs to be on the watch for efforts on the part of the other parent to try to hide how much profit he or she is really getting from a small business.