When making a determination regarding child support or alimony (i.e. spousal support), each party is required to submit information reflecting their incomes, including current pay stubs, W-2s, and tax returns. What is important to know is that where a person’s income fluctuates substantially from year to year, such as in situations where a party owns his or her own business or receives varying bonuses or commissions, there is case law in the State of New Jersey supporting the implementation of income averaging.
Income averaging consists of averaging a party’s last three or five years of income for the purposes of determining his or her income in lieu of simply looking at that party’s year to date income or last year’s tax returns. This method is becoming more and more important given our current economic climate and incomes, bonuses, commissions have substantially declined over the past year and the unemployment rate continues to increase.
To determine whether or not income averaging may be beneficial in the calculation of child support or alimony in any individual case, you should consult with an attorney before making application for calculation or re-calculation of any support obligation.