Thursday, February 12, 2015

My spouse makes a lot more money than reported on our tax return. How can I prove my spouse’s real income?

Excerpt taken from Steven N. Peskind's book titled, Divorce in Illinois: The Legal Process, Your Rights and What to Expect.

First of all, tax returns don’t always tell the whole story about someone’s income. For example, regular gifts received would not be reflected on the return. If your spouse is self-employed, corporate distributions (distinguished from wages or dividends) would not necessarily show up on the personal return. Also, personal expenses paid by the family business will not always show up on the personal return. Finally, if your spouse has access to cash that he or she doesn’t declare, that may not be reflected on the return.

In these circumstances, your lawyer can take a number of actions to determine your spouse’s income with greater accuracy. These include:
  • Conduct more-thorough discovery, including review of W-2s, corporate tax returns, K-1 disclosures on stocks, and personal financial statements prepared for creditors.
  • Examine check registers and bank deposits. If income deposited exceeds income disclosed, that is a way to prove more income.
  • Conduct a lifestyle analysis, determining if the cost of the lifestyle exceeds disclosed income.
  • Take depositions of third parties who have knowledge of income or spending by your spouse. For example, if you know someone paid your spouse cash, your lawyer can subpoena that person to testify to that fact. If the money wasn’t deposited into any accounts or reflected anywhere as income, that would help support your claim.
  • Subpoena records of places where your spouse has made large purchases or received income.
  • Subpoena banks where your spouse has received financing to obtain personal disclosures concerning your spouse’s income. 
Lawyers often hire forensic accountants, who are trained to investigate these types of matters. The accountant will at- tempt to ascertain your spouse’s “real” income rather than the sums disclosed on the tax return. Also, lawyers sometimes hire experts to help you prepare a lifestyle analysis. A lifestyle analysis reconstructs your expenditures over a sample period of time. Assuming your paid family expenses exceed your spouse’s declared income, the analysis confirms the existence of other undisclosed income. Discuss your options with your lawyer. 

You can purchase Steven Peskind's book titled, Divorce in Illinois: The Legal Process, Your Rights and What to Expect on by clicking here.

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