Child Support When You’re Self-Employed in Michigan

Child Support in Michigan for the Self-Employed

If you are a self-employed parent, an independent contractor, or a small business owner, navigating the complexities of child support in Michigan can feel overwhelming. Unlike a parent with a steady paycheck from a large employer, your income may fluctuate, and your finances may include business expenses, tax deductions, and personal use of company assets.

The guiding principle for Michigan child support is that both parents are responsible for financially supporting their children. The Michigan Child Support Formula Manual provides rules for determining that obligation. It determines a fair amount based on each family’s unique details.

How is Income Determined for Self-Employed Parents?

For most parents, calculating income is straightforward. Their income is reported on a W-2 form, and a pay stub shows deductions. For someone self-employed, the process is more involved. The goal is determining a parent’s net income and the money available to support their living expenses and children.

The court will examine your financial documents more closely than just your tax return. This could include your business’s tax returns, profit and loss statements, and bank records. The Michigan Child Support Formula Manual considers income to be comprehensive. It includes wages, salaries, and earnings from a business, partnerships, and self-employment. The manual also looks at less obvious sources of funds. For example, those may be counted if you receive distributed profits, consulting fees, or even gifts that reduce your expenses. The court wants a complete picture of all the funds you have at your disposal.

One of the most significant challenges for self-employed individuals is how the court handles business expenses and tax deductions. The court may add back certain expenses the IRS allows, but this doesn’t necessarily reduce your ability to pay child support. A typical example is depreciation. While this is a valid business deduction for tax purposes, it does not represent an actual reduction in cash. The court may add that amount to your income when calculating support. Likewise, the value of perquisites may be included. If your business provides you with a company vehicle for personal use, covers the cost of your cell phone, or pays for meals that reduce your living costs, the value of these items can be considered income for child support purposes.

What Is the Role of the Friend of the Court in Okemos?

In Michigan, the Friend of the Court (FOC) plays a vital role in the child support process. For families in and around Okemos, your case would be handled by the Ingham County Friend of the Court, located in Lansing. The FOC helps establish, modify, and enforce support orders. A support specialist from the FOC will review both parents’ financial information and run a calculation based on the Michigan Child Support Formula. This calculation considers both parents’ net incomes, the number of parent overnights with the children, and costs like health insurance and childcare.

After their review, the FOC will issue a recommendation. While this recommendation is not a final court order, it is a crucial step. A judge will typically adopt the FOC’s recommendation unless there are strong, compelling reasons to deviate from it.

Dealing with Fluctuating Income

A key issue for many self-employed parents is that their income is inconsistent. It can vary from month to month or season to season. The courts recognize this. When determining an income for child support, the court may average your earnings over several years to arrive at a stable monthly or yearly amount. This approach helps create a consistent support order that doesn’t need to be constantly adjusted. It also means that if your income has recently decreased, the court may look at your earnings from a more profitable year and base the support order on that amount. This can be a significant point of contention.

When you are self-employed, it is important to be prepared to present a clear, detailed picture of your finances. This involves more than just a tax return. You should be ready to provide a full accounting of your business income and expenses, demonstrating what your earnings truly are. Presenting this information in a way that is easy to understand and legally sound is a key part of the process.

What if the Calculated Amount Seems Unfair?

While the Michigan Child Support Formula is designed to be fair and consistent, there are situations where a strict application may not be appropriate. These are called deviations from the formula. The Michigan Child Support Formula Manual lists many specific factors that can justify a deviation.

A court may consider a deviation if a support order leaves one parent with so little income that they cannot meet their basic needs. Another factor could be if a child has extraordinary medical expenses not adequately covered by the standard formula. It is important to remember that a deviation is not guaranteed. You must show the court that the formula amount would be unjust or inappropriate for your circumstances.

A Partner in Your Journey

The process of determining child support can be difficult, even emotional. We understand your love for your children and desire to provide for them. Bailey & Terranova, P.C. approaches these matters with empathy and a dedication to protecting the well-being of your family. We provide clear explanations and strong advocacy so that you can navigate this process with a sense of peace. Our team is here to listen to your story and help you find a path forward.

If you have questions about child support as a self-employed parent, we invite you to contact us. We serve families throughout Okemos, Lansing, and the wider Mid-Michigan area. Let us help you understand your legal options and work toward a stable future.

Contact us today at 517.236.7187 to begin a discussion.