Child support vs business expenses.

[Andyd]

What is the name of your state? California
Hi last year I was working full time and started a side consulting business and trying to get it off the ground. I was still makeing my regular income and pay my regular monthly payments. Normally at the end of the year I ha e bonus income from the job which ends up being split for more child support. However I incurred a considerable loss from expenses of about $35k in my new businesses.
And no income yet.

This is why I'm still working full-time as well. I was relieved to know my LLC expenses would reduce tax liability. Does it also lower my income for child support. Even though.the income was from my day job and expenses from the business?

 

[adjusterjack]

Does it also lower my income for child support.

No.

You don't get a reduction in child support because you voluntarily started a business that lost you money.

 

[LdiJ]

What is the name of your state? California
Hi last year I was working full time and started a side consulting business and trying to get it off the ground. I was still makeing my regular income and pay my regular monthly payments. Normally at the end of the year I ha e bonus income from the job which ends up being split for more child support. However I incurred a considerable loss from expenses of about $35k in my new businesses.
And no income yet.

This is why I'm still working full-time as well. I was relieved to know my LLC expenses would reduce tax liability. Does it also lower my income for child support. Even though.the income was from my day job and expenses from the business?

How in the world did you incur 35k in losses on a consulting business? You might want to review your documentation on those expenses because that is quite high for a business that should have low expenses. You will want to have very solid documentation in case you get challenged by the IRS.

 

[Andyd]

No.

You don't get a reduction in child support because you voluntarily started a business that lost you money.

And yet next year when it makes profit. I will have to split that extra portion for bonus support?

 

[PayrollHRGuy]

And yet next year when it makes profit. I will have to split that extra portion for bonus support?

Assuming your CS is ordered as a percentage of your earnings or you are in arrears, yes.

 

[bcr229]

Talk to a tax pro and see which expenses can be depreciated/deducted over multiple years.

 

[LdiJ]

Talk to a tax pro and see which expenses can be depreciated/deducted over multiple years.

You might honestly be better off spreading whatever can be spread over multiple years.

 

[stealth2]

And yet next year when it makes profit. I will have to split that extra portion for bonus support?

It would certainly be a terrible thing to share the fruits of your labor with your child(ren).

 

[t74]

It would certainly be a terrible thing to share the fruits of your labor with your child(ren).

I think the concern is the child does not share in the loss but shares in the gain. It is in OP's best financial interest to forego the extra effort for his own company since most small businesses fail. especially if the expenses cause hardship to himself.

I am very conservative - especially when children are involved - and go for the guaranteed income rather that the possibility of higher income but also the possibility of loss of income. Kids have to eat.

 

[LdiJ]

I think the concern is the child does not share in the loss but shares in the gain. It is in OP's best financial interest to forego the extra effort for his own company since most small businesses fail. especially if the expenses cause hardship to himself.

That is not necessarily true, particularly with consulting businesses. Although I do have a concern (so far not addressed by the OP) how it's possible that a consulting business ended up with the kind of losses he ended up with.

I am very conservative - especially when children are involved - and go for the guaranteed income rather that the possibility of higher income but also the possibility of loss of income. Kids have to eat.

I don't disagree with you. However it honestly depends on the business. When I was a child my dad switched from a guaranteed income to a business as an insurance agent and yes, there was 6 months to a year where things were tight, but ultimately things were much, much better.

 

[t74]

But was your dad on court ordered child support at the time? Supporting - at least partially - two households is more difficult than one.

 

[FlyingRon]

Life isn't always fair. You are on your own for losses, but expected to share your gains.

 

[Andyd]

How in the world did you incur 35k in losses on a consulting business? You might want to review your documentation on those expenses because that is quite high for a business that should have low expenses. You will want to have very solid documentation in case you get challenged by the IRS.

Startup costs. And I've needed to hired others to partner on projects.

 

[Andyd]

Life isn't always fair. You are on your own for losses, but expected to share your gains.

Thanks. I do appreciate your advice. I know you are only seeing a simplistic picture. I'm quite frustrated how broken support is now. So while I save for kids college. And pay her extra while her new boyfriend covers all her expenses. She buys clothes and jewelry and spends little on kids and saves nothing for the future. I would be glad to pay all and more if it actually went to support of the kids but it doesn't.

And then I try to jumpstart a business and make some more for the family... still I have to feed her materialistic life and my kids loose. It seems quite broken.

 

[LdiJ]

Startup costs. And I've needed to hired others to partner on projects.

Sorry, but that was vague enough to be no answer at all. A consultant doesn't hire others unless a consultant has a consulting job that pays enough to justify hiring others. I also still question what kind of start up costs a consulting business would have that would be that high, and on top of that, you cannot necessarily deduct all of your start up costs in the first year of operation. Often you are required to amortize those costs.

You REALLY need a tax professional this year, and one that has real experience with small business returns.