Under-Reporting Income: How To Know If Your Spouse Is Hiding Earnings

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In a high-conflict, high-asset divorce, one spouse may be intentionally under-reporting income. If successful, these attempts to hide income often have a cascading effect on the divorce process as they can result in reduced spousal support and lowered child support. These attempts can even affect the overall property division. There are two aspects to under-reporting income that divorcees need to know: the red flags that your soon-to-be ex might be engaging in this behavior and what you can do about it if you suspect they are.

Red Flags for Under-Reporting Income: Spot the Signs

There are often a few red flags that you and your attorney will be looking for that indicate your spouse might be engaging in this behavioral pattern.

  1. Sudden Lifestyle Changes: If your soon-to-be ex’s spending has changed suddenly without any changes to their reported income, this could be a sign that something is amiss. If you notice they’re making purchases they couldn’t previously afford, that might be a sign that more money is available to them now.
  2. Unexplained Business Expenses: In many high-asset divorces, one or both spouses own some business. Divorcees sometimes “cook the books” in their business to conceal income. For example, maybe the Rolex watch they bought isn’t a business expense but should be considered income.
  3. Increasing Reliance on Cash: Credit cards, debit cards, and e-wallets are much easier to trace. If people start paying with cash when they previously used these electronic methods, that’s a red flag that someone is paying them in cash so they can under-report their income.

There are additional signs that your divorce attorney will help you spot, but those are three big ones.

What Can You Do About It?

If you suspect your soon-to-be ex might be hiding some income, know you have recourse.

First, an experienced divorce attorney can help you hire a forensic accountant to review your spouse’s financial records. These accountants can help uncover shady dealings (like expenses that are not really expenses in the business).

Next, you can request a full financial disclosure. California requires a complete and truthful financial disclosure as part of the divorce process. Penalties for lying on this document can be significant, including being held in contempt of court and paying the other spouse’s attorney fees to track the income and assets. In extreme cases, a judge can even award more money to the wronged spouse to compensate for the fraudulent disclosure.

Lastly, if you suspect your soon-to-be ex is under-reporting income, please consult a California divorce attorney.

Under-Reporting Income: A Sadly Common Problem

Don’t despair or panic if you suspect your spouse may be under-reporting income. Sadly, this is a common problem that divorce attorneys always see, and almost all experienced legal professionals know how to get the under-reporting spouse to pay their fair share.

If you suspect your spouse might be under-reporting income, please call our offices at (408) 560-4487 or complete our secure online form to schedule a case evaluation. One of our attorneys will be happy to learn more about your case and advise you on the best steps forward.

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