Second Page of Income and Expense Declaration

divorce income

Income and Expense Declaration: How to Complete Important Sections Listed on Page 2

  • Income and Expense Declaration (FL-150) form: https://courts.ca.gov/sites/default/files/courts/default/2024-11/fl150.pdf
  • Section 5: Income
    • Last Month: List the total income received for the prior month (past 30 days).
      • This can be calculated by referencing a recent past paycheck stub.
      • This can be calculated by looking at a Profit and Loss statement from prior month.
      • Go through all categories of income and accurately itemize the following: salary, overtime, commissions, tips, etc.
      • Note: if overtime varies, indicate such on the Income and Expense (I&E) statement and indicate the amount of overtime expected at the bottom of page 4. It can be argued overtime should not be included in income available for support because it is variable.
        • Counter- Look at total pay received Year to Date (YTD). This includes payment received by all sources on the paystub. This figure is then divided by the number of months that have passed since January 1st (e.g., For a November 15 paystub, take total pay received YTD and divide by 10.5 months which amounts to average monthly income).
        • Counter argument: A Smith-Ostler order may be requested for those who receive commissions or overtime that vary. Such order would require a party to pay a percentage of any commission or bonus received overtime for child and/or spousal support, while setting base support without including commissions or overtime. Notice of receipt of such commission or overtime payment must be given to the other party the receiving party will receive payment (i.e., monthly, quarterly, etc.) and a copy of any check or payment statement showing the additional compensation must be provided within 10 days of receipt. The receiving party would be required to pay the percentage owed to other party within 10 days of receipt of payment. This language should be specifically included in an Smith-Ostler order.
    • Average Monthly: How to calculate average monthly income (definition stated on top of page 2). For average monthly income, add up all income received in each category within the last 12 months and divide by 12.
      • Another way to determine average monthly income is by referencing a person’s prior year tax return. Determine gross income declared and divide by 12. Place an * by the number and write per 2023 tax return.
      • Alternatively, one can use the income paid year to date (YTD), indicated on a paycheck paystub and then divide by the number of months since the beginning of the year. Place an * and write YTD per paystub and date of paycheck.
  • Section 6: Investment Income
    • Dividends & Interest: Can be determined by referencing prior year’s 1099 statement. Prior year’s tax return will also show dividends and interest received.
    • Rental property income: This is reported by attaching the schedule from tax returns that show total rents received after businesses expenses. Rental property is treated as a business. All expenses should be deducted from rents received including mortgage payments, property taxes, insurance, property management fees, advertising for vacant units, utilities paid, water, sewage, trash, etc. Be wary not to include non-cash expenses like depreciation (see Marriage of Hein) and do not include personal expenses like most automobile expense, meals, entertainment, some insurance unrelated to the property, maintenance for personal home, etc.
    • Trust Income: List amount received from trust, less any expenses paid (ie. legal expenses and accounting expenses) to determine the trust income.
    • Other: If there is uncertainty with reporting income or there exists other interests, dividends or investment income, inquire with a licensed attorney at Morales Law to determine the best practices for accurate reporting.
  • Section 7: Reporting income and business expenses for self-employment.
    • The amounts listed will be profit, not revenue.
      • Revenue is the total amount of sales or income the business receives.
      • Profit is the total income the business receives, less legitimate business expenses.
      • It is important to detail all business expenses in a profit and loss statement (P&L) to accurately reflect the profit for a business.
      • Business expenses
        • Personal expenses are not allowable deductions for a business. When analyzing profits for a business only deductions for business purposes qualify. Always check to ensure personal expenses are not claimed as business expenses.
          • Car payments and maintenance- If a vehicle is used for both personal and business purposes, the percentage of the vehicle’s use must be determined. The personal use of a business vehicle is not a business expense and therefore does not qualify as a business deduction. For a mixed-use vehicle, add back 50% of the claimed vehicle expense as personal is a general rule.
          • Gas for mixed-use vehicles will be quantified same as above.
          • Cell Phone. If business owner only has one cell phone, they are using the cell phone for personal and business purposes. Add back 50% for personal use is a general rule.
          • Meals and Entertainment. These are rarely classified as true business expenses. Typically, 100% will be added back as a personal expenditures. Such expenses may only be classified as a business expense if the claimant is in sales.
        • Look for non-cash expenses
          • Depreciation is considered a non-cash expense. Depreciation is a business expense under IRS guidelines, but is not considered for support purposes. See Marriage of Hein. Because a business does not actually pay money for a depreciation expense, it is considered a non-cash expense. Therefore, any depreciation expense is added back as income to the business.
    • NOTE- Bank statements are necessary to determine another party’s income. If the total amount of deposits made into one’s bank account each month is greater than the amount claimed as income, there may be an additional source of income which is not being disclosed. You can argue that a party’s income is the total, or annual, deposits per their bank statements. But don’t include transfers from other accounts.
      • NOTE- When a party is expected to receive cash income that goes unreported consider the following:
        • What expenses are absent from their bank account or credit card statements as being paid? (i.e. rent, car payment, meals, gas, etc.)
        • Are there cash deposits into the bank?
        • Determine if expenses listed on page 3 of the Income and Expense Statement (I&E) exceed their claimed income, when no other credit card or other debts are included. This may indicate that there is undisclosed cash income being used to pay expenses.
    • Disclose the number of years in business. If a business was started before marriage, it is a separate property interest. If a business was started during marriage, it is presumed to be a community property business. If a business was started before marriage, but then incorporated during marriage, list the earliest date, as the business may still be characterized as separate property. Businesses may have both separate and community property interests as well.
    • Name of business.
    • Type of business.
    • You are required to attach a profit and loss statement for the last two years or a Schedule C from your last federal tax return. Make sure to redact social security numbers.
    • When there is more than one business to be considered, provide the information above for each business.
  • Section 8: Additional Income
    • When a party is in receipt of a single, one-time income event (ie. lottery winnings, inheritance, etc.) within the last 12 months, the amount and source must be disclosed.
      • Examples
        • Gift from family member or friend
        • Loan
        • Lottery or gambling winnings
        • Inheritance
        • Bonus- even if negligible
  • Section 9: Change in Income
    • Report any significant change in financial situation over the last 12 months.
      • Examples:
        • Unemployment
        • Firing
        • New Job
        • New Pay Rate
        • Bonus received
        • Starting new business.
  • Section 10: Deductions
    • (a) Required Union Dues: State monthly amount of union dues, only if you are a part of a union. This will be added in the union due section of any guideline support calculation. A more favorable support number will be generated to the member of the union who pays union dues as they will have less income available for support.
    • (b) Required Retirement Payments: Only for union or government employees. Do not include Social Security, FICA, 401(k) or IRA contributions. This does not include 403(b) contributions. Government or union employee are typically required to contribute to retirement. The higher the monthly contribution, the less money available for support, which often leads to a more favorable calculation for support. Parties who work for a private company that contributes to their employee’s 401(k) account will receive a less favorable calculation for support. The support calculation is less favorable for those receiving a company contribution payment to a 401 (k) account.
    • (c) Medical and health Insurance premiums: include the monthly amount for all premiums paid. Include health and dental insurance. Include the total amount paid for all dependents. Do not include the amount paid to Health Savings Accounts (“HSAs”).
    • (d) Child support paid for children from a prior relationship: include amount paid, even if voluntary.
    • (e) Spousal support paid for prior marriage. Label payment as “alimony” amount paid. If payment is a federal tax deduction, check the appropriate box.
    • (f) Partner support paid by court order from a difference domestic partnership shall be listed.
    • (g) Necessary Job-related expenses not reimbursed by employer. It is required to attach an explanation as Attachment 10(g). The attachment shall include receipts, highlighted bank or credit card statements, etc. showing the amounts paid. If you travel for work certain expenses are excluded including gas, airfare, and entertainment of clients. Include any cost paid for tools or cost for trainings which are not reimbursable.
  • Section 11: Assets
    • Be precise with these numbers. Do not round numbers either up or down. For example, do not put $400, instead of $426.37. This is evidence of inaccurate accounting.
      • If either party uses a rounded number, an argument of inaccurate accounting may be made and their financial disclosures could be viewed with distrust under Cal. Evid. Code § 412, which states, “If weaker and less satisfactory evidence is offered when it was within the power of the party to produce stronger and more satisfactory evidence, the evidence offered should be viewed with distrust.”
    • Section 11 is required to be filled out if there is a request for attorney fees. See California Rules of Court, Rule 5.427. If such request is omitted, the law may be cited, the other party’s failure to comply will be noted, and the attorney fee request will likely be denied.
    • 11(a): Add all current bank, checking and savings account funds and record number in this section.
    • 11(b): Include only assets that may readily be sold. Do not include assets in bank accounts listed in section 11(a). Do not include retirement, 401(k), pension, or IRA accounts. Because these are not easily sellable assets, they will be listed in section 11(c). Include vehicles, investment accounts, cryptocurrency, stocks, bonds, etc. as these are not considered easily sellable assets and will be included in section 11(c). If you have a certificate of deposit with a sales restriction, it should also be included in section 11(c).
    • 11(c): Do not include the amounts calculated in sections 11(a) and 11(b) when completing section 11(c). Always place a check in the “personal” box but only check box for “real” if real estate is owned. First calculate total assets, then subtract by total debts. Include all assets and debts.