Welcome to FreeDivorce.com.
Christina: This is Christina.
Ed: This is Ed. Today, we are going to talk about how to deal with a spouse’s overtime pay and bonus income when your are trying to create a fair child support order. We will also talk about how to deal with a spouse’s undisclosed income.
Ed: Christina, before we get to extra pay or bonus pay, would you first talk about how to determine a party’s base salary or income?
Christina: As you mentioned in the last video, salary/wages number that you enter into the child support calculation program is always the gross amount of a party’s salary, meaning the amount before taxes are taken out. Never use the net pay check amount. If you and your spouse get paid a base monthly salary, say $4,000 per month, figuring out each party’s gross income for the support calculation is simple. You just enter $4,000 on the “Wages and Salary” data entry line. If your spouse gets paid an hourly wage and works full time, there is also no real mystery as to the amount of their base salary or wages. Just take their hourly wage and multiply it by 40 hours per week, then multiply by 52 weeks in a year, and then divide by 12 months.
Ed: What if you or your spouse earns overtime pay or commission income, what do you do?
Christina: If your spouse also earns overtime pay or bonus income, you still use their base salary for the support calculation, but you then also use an overtime chart. We are now showing you the second page of our sample DissoMaster child support calculation. This page, along with the first page of the DissoMaster calculation, can be found as a PDF document in our Court Forms Database under the title, “DissoMaster Support Calculation”. This second page is the overtime chart that is part of the child support calculation. The chart is called, “Father Monthly Overtime Wages Report”. This can be used to calculate how much extra child support should be paid when the father receives additional overtime income. It can also be used when father receives extra income from commissions. As an example, if father earns $500 of overtime income in a particular month, the chart indicates he should pay the mother 23.73% of the gross amount of that extra income or $119 as additional child support. 23.73% of $500 is the $119. To get these numbers, look down the column entitled, “Father’s Gross Overtime” until you see the $500 figure. Then, go across to the next column entitled, “Basic CS%” and you will see the 23.73%. We have highlighted these numbers.
On the Overtime Wages Report, there is a column entitled, “Basic CS%”. The “CS%” stands for the percentage of the gross amount of overtime pay that should be paid as additional child support. The sample overtime chart goes up to $2,000. However, the “Father Monthly Overtime Wages Report” can be expanded to go up to any amount of overtime income you want. The incremental increases can also be modified. So, instead of the income going up by $100 increments, the chart can be adjusted to go up by $500 increments or $1,000 increments or whatever amount you want. The DissoMaster program also includes a “Mother Monthly Overtime Wages Report” for cases in which the mother earns overtime pay or commissions. There is even a two-way overtime chart that can be used when both parties earn overtime pay. You can access these charts when you are in the DissoMaster program by doing the following: Go to the top of the page and you will see the words, “File” “Edit” “Report” and “Help”. Click on the word, “Report”. A drop-down menu will appear. Go to the bottom of the menu, where it says, “Monthly Overtime”. If you hover over “Monthly Overtime”, a side menu will appear and from that menu, you can print a “Monthly Overtime Wages Report” for Father, Mother, or a two-way report.
Ed: What if my spouse does not earn monthly overtime income or monthly commissions, but instead earns an annual bonus, does the DissoMaster program have a separate bonus chart?
Christina: Yes. Instead of monthly overtime, some people tend to get one or more large bonus payments per year. For these situations, the DissoMaster program also has a “Father Annual Bonus Wages Report”, and a “Mother Annual Bonus Wages Report”. The concept is the same as the overtime chart. You have a base child support number calculated using both parties’ base monthly salary numbers. If one or both parties receive bonus income, then you look up the percentage of additional child support they should pay on that extra income. So, no matter how much someone earns, they pay (or receive) a fair amount of support. The Annual Bonus Wages Reports can be accessed the same way as the overtime reports. Click on the word, “Reports” at the top of the page, then click on “Annual Bonus” in the drop-down menu, and then click on Father, Mother, or the two-way report.
Ed: What if I earn extra income from stock options or the award of Restricted Stock Units?
Christina: You can use the Annual Bonus Wages Report to figure out what percentage of any future stock option income or RSU income should be paid as additional child support.
Ed: Why do we need to bother with these overtime and bonus charts?
Christina: These overtime and bonus charts make it possible to have a fair child support order even when one or both parties have a job where it is difficult or impossible to predict how much they will actually earn. So long as you can start with a base monthly salary number, and both parties feel comfortable they will earn at least that much per month, then you can use the overtime charts or bonus charts to capture a fair amount of child support on any extra income over the base salary. You do not have to include any overtime or bonus chart as part of your child support agreement. If both parties are comfortable with just a base child support number, you can skip the overtime and bonus charts. Of course, if neither party earns overtime, commissions, or bonus income, you can also skip these charts.
Ed: After I have run my DissoMaster calculation and print out my calculation, including a printout of any bonus chart, what do I do?
Christina: You will attach a copy of your DissoMaster support calculation printout and a copy of any overtime or bonus chart(s) to your settlement agreement or divorce judgment. The Dissomaster support calculation will show the court how you calculated the amount of child support set forth in your agreement. Any overtime or bonus charts that are attached to your settlement agreement or judgment can be referred to by either party in the future as overtime income and bonus income is received so they know how much additional support should be paid.
Ed: The sample overtime chart has the father paying 23.73% of his overtime pay as additional child support. Can I just use that 23% bonus number for my settlement agreement?
Christina: No. The sample overtime chart we have supplied applies to a specific case – a case where the father has 30% custody, earns $4,333 per month, pays $300 per month for health insurance, etc. Each time you change a number for the child support calculation, it also changes the numbers on the overtime chart. What this means is, you can’t use the sample overtime chart we have provided as a means to calculate the additional support that you or your spouse should pay based on overtime income. The sample overtime chart is part of the child support calculation for a particular case.
Ed: Do all child support calculation software programs include bonus charts?
Christina: No. The software child support calculator you use may not include overtime charts or bonus charts.
Ed: What do I do if the program I am using does not include overtime or bonus charts?
Christina: If the support calculator you are using does not include overtime or bonus charts, you can still come up with a formula that takes into account overtime pay and bonus pay. This is how you do it. Run your support calculation using each party’s base monthly salary. Then, run the support calculation again, assuming that the father has an extra $1,000 per month of pay. Look at how much the child support increased. Then, calculate the percentage. For example, assume Father’s base pay is $5,000 per month. You ran the support calculation and the base child support number is $919 per month for one child. Now, add an extra $1,000 to Father’s base salary. Run the same calculation, but with father’s income at $6,000 per month. The new child support number is $1,063. The amount of child support increased by $144 due to the extra $1,000 of income. If you divide $144 by $1,000, you get .144, which is the same as 14.4%. You could make an agreement that the father will pay the mother $919 per month in base child support, and if he gets overtime income or bonus income, he will pay mother additional child support equal to 14.4% of the gross amount of that extra income. Your settlement agreement could state that the 14.4% will apply no matter what the amount of the bonus income or overtime pay turns out to be.
Ed: Is this approach, where you add $1,000 to a party’s base salary and re-run the support calculation to determine an appropriate bonus percentage, is a good approach?
Christina: This approach essentially accomplishes the same goal as the complicated bonus charts, but it is much simpler to use and many people prefer this approach, even when they have access to support calculation programs that include overtime and bonus charts. Frankly, overtime charts and bonus charts are oftentimes confusing and cumbersome to use, particularly the two-way charts. It is oftentimes much easier to just use a flat percentage that will apply to whatever amount of earnings a parent receives that exceeds the amount of their base salary that was used to calculate the base child support amount.
Ed: In the next video, we will talk about how to determine the guideline child support number without buying the DissoMaster program and without running any child support calculation program yourself.