Tax time is approaching, and with it comes the yearly recalculation of child support for many families. In many cases, and for many people, recalculating child support is as simple as looking at the paying party’s Line 150 on their T1 Tax Return (the Line 150 amount is representative of your Total Income earned for the year), and calculating the amount of child support payable pursuant to the Child Support Tables. This is often the case for parties who earn a single source of income from an employer. Under these types of circumstances, there is very little dispute or question as to whether other sources of income need to be modified or whether additional income can be imputed to a paying party from their closely held corporations.
The recalculation of child support becomes somewhat more difficult when a paying party earns income from a number of different sources, or earns their income through a closely held corporation. Depending on the circumstances, the information required to calculate income for any given year might include any of the following items:
- your income tax returns for each of the three most recent tax years; and
- the notices of assessment and reassessment from the Canada Revenue Agency for each of the three most recent tax years.
- your most recent statement of earnings or pay slip, or a letter from your employer stating your salary or wages;
- your corporation’s financial statements if you control a corporation;
- financial statements, if available, if you are self-employed or any documentation demonstrating your business’ source of revenue, itemized expenses, and net revenue;
- information on any “banked time” for which the paying party was not paid, or deferred as “time-off in lieu” until the next year (we have previously provided a blog explaining the more complicated issues that can arise in banking time);
- information on income you received from employment insurance;
- information on income you received from workers’ compensation;
- information on income you received from disability payments;
- information on income you received from social or public assistance;
- information on income you received from cashing in RRSPs;
- Tax Schedules for income received from investments;
- details of any business partnerships;
- copies of any applicable trust settlement agreements, along with the trust’s three most recent financial statements; and
- information about your corporation’s pre-tax income if you are a shareholder, officer or controller of a corporation.
Once you have this information, you are better suited to determining what your income for child support purposes might be. However, it is not an easy process. We addressed all the possible additions and deductions to income that have to be considered in a prior blog. The Federal Government has issued worksheets for parties trying to calculate their income, along with instructions on how to complete the worksheets. If anything, these worksheets only further reinforce the complexity of calculating income for child support purposes when a party’s income is more than just employment income – in fact the worksheet instructions specifically advise users that they may wish to obtain advice from family law lawyers in calculating income for child support purposes.
This is the difficulty with calculating income for child support purposes – in a lot of cases it is not as simple as looking at the Line 150 entry and typing the number into any of the online child support calculators. So much more goes into determining what the actual income for the purposes of child support might be; and a number of the additions and deductions are of a complex or circumstance based nature such that one party might believe an addition or deduction is warranted, whereas another party might disagree with that addition or deduction. There is very little clarity and ease of use provided through the Child Support Guidelines and their associated Schedules. As a result, something that is intended to simply provide support for a child often devolves into lengthy legal battles over “actual income” that can cost as much as the child support being argued about.
An additional risk to be noted is that a number of websites and legal providers have listed child support calculators on their websites. While these calculators are correct in the sense that they will provide the accurate child support amounts for any income that is entered in the calculator, they create a risk for parties relying upon them as they do not ensure that the income being entered is actually the correct amount. Without proper advice as to potential deductions or additions, parties may be entering the wrong amounts into these online calculators and basing their child support payments on entirely wrong numbers.
Caution and consideration are required when calculating income that is more than just employment income from an outside employer. The schedules, the possible deductions, and possible additions are complex issues and misunderstanding these factors can lead to parties deciding on child support that may be incorrect and therefore prejudice either party or even the child.
At Mincher Koeman LLP, we have significant experience in calculating income for child and spousal support purposes, should you require assistance in determining your income, or determining the other party’s income for child or spousal support purposes, give us a call at (403) 910-3000, or email us at firstname.lastname@example.org.