Self-employed Parent’s Adjustments to Gross Income Under the Tennessee Child Support Guidelines
Under the Tennessee child support guidelines, the calculation gets tricky when determining income for self-employed parents, . If the Rules below do not make absolute sense to you, it doesn’t to most lawyers, too. Certified Public Accountants (CPAs) can help.
For example, know that the amounts listed for the gross earnings limit below is adjusted annually by tax law. A CPA will know the current year’s amount. Also, note that the social security and medicare tax percentages can change – even though they have not changed in many years.
Finally, know that self-employed tax payers normally pay double the FICA (social security and medicare) because they are both the employer and employee. But, all child support calculations include only one deduction – that for the employee’s portion. The employer’s portion of the contribution is excluded.
(4) Adjustments to Gross Income for Self-Employed Parents.
(a) The Child Support Schedule includes deductions from a parent’s gross income for the employee’s share of the contributions for the first six and two-tenths percent (6.2%) in Federal Insurance Contributions Act (FICA) and one and forty-five hundredths (1.45%) in Medicare taxes. The full tax rate, fifteen and three-tenths percent (15.3%), is a total of twelve and four-tenths percent (12.4%) for social security (old-age, survivors, and disability insurance) and two and nine-tenths percent (2.9%) for Medicare (hospital insurance). All net earnings of at least four hundred dollars ($400) are subject to the Medicare part. Employers pay one-half of an employee’s FICA and Medicare taxes.
(b) For a self-employed parent who is paying self-employment tax, an amount for FICA — six and two-tenths percent (6.2%) Social Security plus one and forty-five hundredths percent (1.45%) Medicare as of 1991, or any amount subsequently set by federal law as FICA tax — shall be deducted from that parent’s gross income earned from selfemployment, up to the amounts allowed under federal law, and actually paid by the parent.
(c) Social Security tax withholding (FICA) for high-income persons may vary during the year. Six and two-tenths percent (6.2%) is withheld on the first one hundred two thousand dollars ($102,000) of gross earnings (for wage earners in 2008). A maximum of six thousand three hundred twenty-four dollars ($6324) of FICA tax will be withheld in a year.
(d) Self-employed persons are required by law to pay the full FICA tax of twelve and four tenths percent (12.4%) up to the gross earnings limit of one hundred two thousand dollars ($102,000) and the full Medicare tax rate of two and nine tenths percent (2.9%) on all earned income. One half of each amount is already accounted for in the BCSO amounts on the Schedule.
(e) Any self-employment tax paid up to one-half of the maximum amounts due in a year shall be deducted from gross income as part of the calculation of a parent’s Adjusted Gross Income, as indicated in Part II of the CS Worksheet.
(f) When calculating credits for other qualified children under paragraph (5) below, any self-employment tax paid shall also be deducted on the Credit Worksheet from a parent’s gross income for the purposes of calculating a theoretical child support order.
(g) The percentages and dollar amounts established or referenced in this paragraph (4) with respect to the payment of self-employment taxes shall be adjusted by the Department or by the tribunal, as necessary, as relevant changes occur in the federal tax laws.
Tennessee Child Support Guidelines, August 2008.
For more information, see Self-employed Parent’s Income Determination in Tennessee Child Support.
Memphis divorce attorney, Miles Mason, Sr., JD, CPA, practices family law exclusively with the Miles Mason Family Law Group, PLC in Memphis, Tennessee serving clients in Germantown, Collierville and the west Tennessee area. To learn more about Tennessee child support laws, read and view:
- Tennessee Child Support & Divorce Law Answers to FAQs
- How to Modify Child Support in Tennessee
- Tennessee Child Support Law Video Series
- Tennessee Child Support Resources
- Top 6 Tennessee Child Support Strategies