Calculating Your Gross Monthly Income | The Law Office Of Jeanne M. Wilson & Associates (2024)

The Sworn Financial Statement is an important tool for the Court and your attorney to understand your financial position in any family law case. Whether you are facing a divorce, a custody case or modification of custody or a child support matter, it is mandatory that you complete a Sworn Financial Statement and include proof (documents like bills, pay statements, bank accounts, and leases, etc.).

The Sworn Financial Statement

The first page of the SFS includes the first challenge you will confront. That challenge is accurately calculating your “gross monthly income”. While it may sound simple, it can be confusing and sometimes complicated. The Sworn Financial Statement requires you to list all income from any source before any deductions or taxes are taken out. What gets included as “income”? Colorado statutes list income as including:

1. Income from salaries;
2. Wages, including tips declared by the individual for purposes of reporting to the federal internal revenue service or tips imputed to bring the employee's gross earnings to the minimum wage for the number of hours worked, whichever is greater;
3. Commissions;
4. Payments received as an independent contractor for labor or services, which payments must be considered income from self-employment;
5. Bonuses;
6. Dividends;
7. Severance pay;
8. Pension payments and retirement benefits actually received that have not previously been divided as property in this action;
9. Royalties;
10. Rents;
11. Interest;
12. Trust income and distributions;
13. Annuity payments;
14. Capital gains;
15. Any moneys drawn by a self-employed individual for personal use that are deducted as a business expense, which moneys must be considered income from self-employment;
16. Social security benefits, including social security benefits actually received by a party as a result of the disability of that party;
17. Workers' compensation benefits;
18. Unemployment insurance benefits;
19. Disability insurance benefits;
20. Funds held in or payable from any health, accident, disability, or casualty insurance to the extent that such insurance replaces wages or provides income in lieu of wages;
21. Monetary gifts;
22. Monetary prizes, excluding lottery winnings not required by the rules of the Colorado lottery commission to be paid only at the lottery office;
23. Income from general partnerships, limited partnerships, closely held corporations, or limited liability companies; except that, if a party is a passive investor, has a minority interest in the company, and does not have any managerial duties or input, then the income to be recognized may be limited to actual cash distributions received;
24. Expense reimbursements or in-kind payments received by a party in the course of employment, self-employment, or operation of a business if they are significant and reduce personal living expenses;
25. Alimony or maintenance received pursuant to a preexisting court order with a payor who is not a party to the action, as adjusted, if applicable; and
26. Overtime pay, only if the overtime is required by the employer as a condition of employment.

This is a long list, and it is obvious after reading it that in addition to your regular job, you may have other sources of “income”. You do not want the Court to find that you are hiding income, so it is best to disclose it all. If there is a chance that the funds can be excluded from income, your attorney can let you know this and can make the appropriate arguments when necessary.

Here’s a quick (and possibly over-simplified) description of how to calculate your gross monthly income:

If You Are an Hourly Employee

Here is the formula for determining your “gross monthly income”:

Multiply the hourly amount (for example $14/hr.) by the number of hours worked (40 hrs./week is a full-time schedule) by 52 weeks in a year and then divide that amount by 12.

For example:

$14/hr. X 40hrs. =$560/week, and

$560/week X 52 weeks/year =$29,120/year, and

$29,120/year divided by 12 months=$2426.66

This means your “gross monthly income” is $2426.66/mos.

For most child support and spousal support calculations, “full-time employment”, generally means 40 hours per week. Sometimes less than 40 hours can be full-time when proven that the lesser hour employee is still considered “full-time” by the employer). Hours in excess of 40/week can often be excluded for hourly employees when any overtime is optional. Mandatory overtime pay, however, gets included as income.

These calculations can get more complex when shift differential is added and sometimes we will need to look at many months of pay statements to determine an actual hourly rate.

If You Are Salaried

To get your gross monthly income, this may simply be a matter of taking the full amount you earn for one year (BEFORE any taxes or deductions are taken) and dividing it by 12 months. However, hours worked in excess of 40 hours per week are usually not excluded from income since the salary encompasses the number of hours—whatever that number may be. Do not forget to include any bonuses or incentive pay you may receive in addition to your salary as they will also be divided by 12 to get a monthly amount that must be added to your income.

If You Work on Commission or Have a Varied Income Each Month

You may be able to determine an average amount of gross income per month if your pay statements show a yearly amount and it is near the end of the year. For many instances, you will have to figure out some other way to determine your income. If you believe that your current yearly income is comparable to prior years, you might be able to use those prior tax returns to show what you likely made so far this year.

Courts often look at the prior 3 years of tax returns to determine a ballpark amount for incomes. When combined with testimony that you believe the current year is comparable to, or much more or less successful than the prior years, or why the current year is or is not comparable to prior years, the Court can determine your likely gross monthly income.

If You Are Self-Employed

It gets a little more involved because you can deduct your costs and expenses (but NOT taxes) from gross revenues to arrive at your gross income. Often a K-1 or Schedule C from a tax return will provide historical income information as well as anticipated deductions for expenses. Depreciation is usually allowed by the Court as an expense but depreciating an asset (such as a company vehicle) could have other unintended consequences when dividing marital assets.

If You Are Unemployed, Work “Under-the-Table” or Work With Your Spouse in a Home-Based Business for No Pay

you will need to determine what a Court is likely to do with “imputing” you to an income. Imputing an income means the Court will look at the type of work you do or could do, the type of work and wages you have in your history, your monthly expenses, and whether your work appears to pay enough to cover those expenses, bank statements for deposits, education level, ability to work full-time or disability status. For many unemployed people, the Court will impute a minimum wage atleast and will often offset the minimum wage with unemployment benefits actually received.

For “under-the-table” work, bank statements and your monthly expenses, and whether you need credit cards and loans to meet those expenses will be reviewed. For a home-based business with a spouse, the expertise required, the income generated by the business, and the ability of the spouse who is leaving the business to find other employment may play a key role.

Getting it right the first time can help you preserve credibility before the Court and the Judge as well as give you an early opportunity to start understanding the likely outcome of your case. At , we understand the law and the Court's application of the law, so we understand how important it is for our Clients to get it right. Let us help you if you are facing a divorce or custody or family case. Your financial future deserves the best.