In General
On the income and expenses screen, you can enter income from assets, and also expenses associated with debts.
You can also enter payment associated with assets, such as contributions to 401(k) accounts and life insurance premiums.
Entering Income with the Associated Asset, or Without
There are two ways to enter income from assets:
1. With an associated asset; or
2. Without an associated asset.
Please be careful not to enter any income twice.
If you enter it without the asset on an income screen, do not also enter it with the asset on the Assets & Debts screen.
If you did enter it twice, it would be double-counted on the financial affidavit, Budget Report and financial reports.
If you income from assets with the asset, there is a payoff:
When you allocate the asset to one party or the other, the software will also automatically allocate the income associated with that asset.
Suppose you have a Vanguard Mutual Fund which pays an annual dividend of $1,000.
If that Vanguard Mutual Fund is allocated to Party A, then Party A will also have the $1,000 flowing to his or her financial affidavit and Budget Report.
If you switch the allocation to Party B, then Party B will have the $1,000 flowing to his or her financial affidavit and Budget Report.
If you divide the asset 50/50, the $500 will flow to each party.
That way, you can instantly see the impact on the cash flows of the parties of dividing income-bearing assets between them.
Note that business assets are an exception to this rule. For business assets, there is a separate entry to allocate income from the business. This is because it is often the case for businesses that the ongoing business income is allocated differently than the business ownership percent.
Also please note that all of the asset types entered here may also be entered on the Assets & Debts screen. The information at the top level will differ between the two screens, but the “more info” screens for the assets are the same at each location.
When you enter income with the asset, the software assumes that all of the items you entered are equity securities, and so all the income is dividend income. You can change that on the “more info” screen.
Income Entered Without the Associated Asset
In the income section, you can enter various forms of asset-related income for each party: interest income, dividend income, etc.
This is the “quick and dirty” way of entering asset related income.
If the ownership of the underlying asset changed, this number will not change.
Business Income
You can not enter business income without creating a business asset.
But you can quicky enter business assets in the section for business income, and you can specify the value and cash flow of the business.
If you click “more info” you can enter everything about the business, including whether it qualifies as a pass-through entity.
The Net Annual Cash Flow is the net cash flow of the business. For this purpose, do not count depreciation as an expense.
The software will use this number in its tax calculations. So, effectively, the software is assuming that there is no depreciation.
Because of the current generous expensing associated with Internal Revenue Code section 179, this is generally true for most small businesses.
If depreciation is significant, you will want to override the taxable income from the business shown on Forms & Reports >View/Edit Taxes.
If you wish to enter gross income and then itemize the expenses of the business, you may do that on the “more info” screen.
You must specify the percent of cash flow that is being allocated to each party. That is how the software knows how much of the income should flow to the financial affidavit of each party.
In some states, you will see footnotes labeled “Asset” and “Income.” If you see that, then the information you enter with the Asset footnote will flow to the financial affidavit where the asset is entered, and to the Marital Property Division report. The information that you enter with the Income footnote will flow to the financial affidavit where the income flows, and to the Budget Report.
Rental Income
Every real estate property will be listed here, whether it is a rental income property or not.
That is because the software wants to give you the opportunity to specify any property as a rental income property.
If a property is not a rental income property, just ignore it when you see it in this section. As long as you do not enter any rental income, it will not be listed on the financial affidavit or anywhere else as a rental income property.
To specify a property as a rental income property, click the “more info” link for the property, and, in the section on Rental Income, click the checkbox to indicate that it is a rental income property.
Income from Investments and Accounts for Child Support
By default, all investment income counts for the child support calculation.
If you want it not to count, in some states, there is a checkbox to omit investment income for purposes of the child support guideline calculation.
If you do not see the checkbox, and you want to omit investment income for the child support calculation, then create a separate file in which the investment income is zero, and use that file for the child support calculation.
Pension and IRA/401k Income
Pension and IRA/401k income may be entered with or without an asset.
When you enter it without an asset, you specify an amount for each party.
When you enter IRA/401k income with an asset, you enter total income from the account and then specify the percent of the income that each party receives.
In the case of a pension asset, you specify the percent of ownership of the marital portion. The software then divides the income allocable to the marital portion in this percent and allocates all of the income allocable to the separate portion to the plan participant.
Debt Payments
Enter the balance in the monthly payment on each debt.
Also enter the interest rate.
If you are doing cash flow projections, the software will automatically amortize the debt.
It is also important to enter the percent of the debt that will be paid by each party.
The software will multiply the monthly payment by the percent paid by the party, and carry that amount to the financial affidavit.
For example, if there is a $3000 debt with monthly payments are $150, and the debt is being paid 50% by each party, then $75 will go to each party’s financial affidavit.
If the entry with respect to the percent paid by the party is blank, then it none of the payment will flow to the financial affidavit.
Life Insurance Premiums
Life insurance premiums may be entered either with or without the asset.
Unlike other expenses, you do not enter a total and allocate by percentage, but you enter the amount paid by each party.
This is because that is how life insurance policies tend to work. One party or the other is responsible for the premiums.