Go to Top

What is Phantom Income?

Phantom income is income that you never received. Simply speaking, it is income that has flown through to your personal income tax returns, but has not been received by you.

This is often the result of erroneous reporting, or accounting. In any case, this is income that you have not enjoyed, and therefore, should not be considered during divorce negotiations.

If you are in the middle of a divorce, resolving contentious issues of spousal support, child support and alimony will involve perusal of your income tax returns. Attorneys for your wife will use your income tax returns to calculate the child support and alimony payments that she is eligible for.

You may know that the amount that is reflected on your income tax return is not the amount that you received. But don’t expect the court to simply buy into your argument that the phantom income should not be taken into account when determining alimony payments. You may find that the court is unsympathetic to your situation.

For this reason, it is important that you discuss your tax matters with an accountant, who can calculate your net cash flow, and is positioned to explain to the court the concept of phantom revenue, and why this revenue must not be included in your alimony or child support calculations.

For more concerns about how phantom revenue from your business can complicate your divorce and how you can avoid this, speak with a Colorado divorce lawyer.