Locating Hidden Income – Looking Beyond the W-2

By Heather Deskins, CPA/ABV/CFF, CFE, CVA

When a couple is going through a divorce, if there are children involved and/or a disparity in incomes, child and/or spousal support become a hot topic. Often times, it is the biggest topic. When the parties are employees with no ownership interest in the companies they work for, determining their respective incomes may involve simply relying on their W-2 statement from their employer. But what about if they receive a large bonus during the year, have an ownership interest in the company, receive non-cash perks, how is their income determined?

In determining a party’s economic income, reviewing the W-2 statement is just the starting point. Additional documents including, year-end paystubs, personal bank account statements, personal check registers, business tax returns (including Form K-1), business accounting records, business checking account statements, business credit card statements, all can be useful in determining economic income. The paystub may identify regular wages and bonuses, but it fails to identify any personal expenses that may be paid by the business.

Determining a business owner’s economic income involves more detailed analysis. Reviewing the business records may help identify payments made by the business that are personal in nature, such as vacations, household utilities, family cell phone plans, vehicle maintenance, country club memberships, personal legal and accounting fees, as well as meals and entertainment. Business expenses that are determined to be personal and discretionary may be included as income to the business owner.

As forensics accountants, P.D. Eye Forensics, LLC is qualified to review financial records and prepare an economic income analysis that can be used in determining income for child and spousal support purposes.

Heather Deskins, CPA/ABV/CFF, CFE, CVA

Heather Deskins,
CPA/ABV/CFF, CFE, CVA

Managing Member
P.D. Eye Forensics, LLC