A Quick Guide to Income Imputation

If you are involved in a divorce it is necessary to discuss and negotiate how to divide assets and liabilities. You will also address support (alimony and/or child support) after the termination of your marriage. If you or your spouse are recently unemployed or have taken a leave of absence from the workforce, the imputation of income is an issue that will be faced. The imputation of income is based on an evaluation of an individual’s earning capacity. If you or your spouse earn significantly less income than you are able to earn, the alimony and/or child support obligation will be based upon your potential earnings. You or your spouse will be treated as if you were making that potential income.

A Quick Guide to Income Imputation

Questions regarding the imputation of income involves a two (2) step process

First, an analysis must be performed to determine if you or your spouse are voluntarily unemployed/underemployed. This requires intentional conduct, so loss of employment due to market forces wouldn’t warrant an imputation, although willingly choosing a lower-paying career will. To be clear, income may be imputed to either spouse, or both spouses, if they meet this first requirement.

Secondly, it will be necessary to calculate how much should be imputed. This requires a determination of the parties’ earning capacities. This is done based on data from similarly situated individuals by referring to the New Jersey Department of Labor statistics and using the average earnings for that occupation, as well as the party’s historical income. Minimum wage may also prove to be a useful benchmark to calculate potential earnings.

Individuals likely to face imputation issues should ensure that if they have lost their job, a clear effort to pursue new employment occurs. Evidence of resumes being sent to prospective employers or head hunters, on-line searches, phone calls, and interviews all help reduce the likelihood of a finding that someone to be voluntarily unemployed.

This field of law is highly fact-sensitive, and so it is incredibly difficult to provide advice on a general level. It is therefore recommended that you seek the advice of an attorney qualified to understand the nuances of income imputation before proceeding with a divorce.