Child Support and Bonus Pay.
North Carolina has adopted the income shares model for child support. Child support is a shared parental responsibility and the child should receive that amount of each parents’ income that the child would receive were the parents still raising the child together.
The North Carolina Child Support Guidelines (“the guidelines”) provide a relatively fair and practical method for determining each parent’s child support obligation. They are based on a mathematical computation designed to remove the emotional strife associated with the support and needs of a child. The guidelines are adopted by the North Carolina General Statutes in Chapter 50 Section 13.4(c).
However, the fairness and equity built into the Guidelines is directly dependent upon their proper application. Incorrect application of the guidelines can and does result in inequitable results. One way to ensure proper application of the Guidelines is to make sure you explain your gross income to your attorney and that he or she explains it to the Court.
What is Gross Income
Gross income is income from ALL sources. This includes: wages, bonuses, dividends, retirement income, income from rental property, income from trusts, gifts, alimony, and essentially any other monies to which a parent has access.
Under the guidelines, benefits received from means-tested public assistance programs and some other limited sources of money are not included as gross income. These include: food stamps, SSI income, TANF income, child support from another parent of another child, employer contributions to Social Security, Medicare, and contributions by employers to third parties for health, disability, life insurance, or retirement which are not withheld or deducted from the employee’s wages.
Overtime and Bonus Pay Indexing
The guidelines state that “when income is received on an irregular, non-recurring, or one-time basis, the court may average or prorate the income over a specified period of time or require an obligor to pay as child support a percentage of his or her non-recurring income that is equivalent to the percentage of his or her recurring income paid for child support.” (emphasis added).
Thus, if gross income of the parties is calculated leaving out overtime and bonus pay under the appropriate worksheet, then the resulting monthly child support payment would reflect some number which, if divided by the non-custodial parent’s gross income as calculated in the worksheet, would result in a percentage that could then be ordered to be paid of the overtime and/or bonus pay.
Open for interpretation is whether other adjustments, such as work-related child care, insurance, and extraordinary expenses should be included when determining the percentage of overtime to be paid. In fairness, to include those adjustments in a determination of the percentage of overtime and/or bonus pay to be paid, is in essence granting two separate sets of adjustments when only one is warranted.
Benefits to Indexing
Indexing overtime and bonus pay to a percentage has the following benefits to the parents and child:
- It need not be paid by the obligor on a monthly basis and can be ordered paid as received lessening the likelihood that the obligor falls behind in his/her payments;
- If the obligor’s overtime is reduced by his employer, the obligor is not forced to file a motion to modify or be subject to a show cause order in contempt for failing to pay that which he no longer has the ability to pay;
- If the obligor’s employer increases his overtime, he pays more for the benefit of his child without the need for the obligee to file a motion to modify;
- There is less of a chance that the obligor will fall behind in his child support payments due to fluctuating gross income because the income most likely to fluctuate is indexed to a percentage;
- It is not the most often used provision of the Guidelines; and
- Generally, an order indexing bonus or overtime pay to a percentage will include a provision requiring the parties to share income information on a regular basis thereby making significant changes in income of the other parent evident which allows both parents to react quickly to said significant changes in normal recurring income so as to better capture child support.
In conclusion, if an income shares model is desired in North Carolina, then indexing overtime and bonus pay achieves this goal fairly and reasonably to the maximum benefit of the child. It captures money that would otherwise not be collected for the child and prevents unnecessary litigation by accounting for uncontrollable employer dictated reductions in bonus and overtime pay. If you have a child support issue, make sure to hire a licensed attorney in your jurisdiction to help you and provide you with appropriate advice pursuant to the laws of that jurisdiction. If you have a child support issue in North Carolina, make sure to tell that attorney where exactly your income is coming from so that he can advise you whether indexing your bonus and overtime pay is appropriate in your situation.