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PPP funding and the impact on child support

On Behalf of | Jul 30, 2021 | Child & Spousal Support & Alimony |

When pandemic-related shutdowns began, business owners who relied on a steady stream of paying customers every day were suddenly forced to bar them from entering their premises. They had no choice but to explore options to continue bringing in money, with many incorporating delivery or curbside services.

However, revenues continued to lag as people decided to stay home. Some businesses closed with countless employees let go simply because owners could not afford to pay them.

The Paycheck Protection Program to the rescue

In response to the significant downturn businesses experienced, the Paycheck Protection Program (PPP) was launched to help hard-working entrepreneurs continue their operations with loans used to pay staff during the shutdowns.

As with any new government program, complexities exist in the processing and dispersing of financial support. Issues become more challenging if the money goes to a business owner who pays child support as part of a divorce agreement.

Two sources of income, specifically paychecks and net profits, are factors in the child support calculator. Loans are not considered income because they are not revenue from selling products. PPP financing is specifically used to pay employees, including the person who owns and operates the business.

Some business owners use PPP to pay their employees and not themselves. However, what may seem like a sacrifice to ensure employees can make ends meet could raise red flags with accusations of manipulating the system, particularly those who pay child support. Information on the loan application could reveal this form of “shell game” should the owner’s salary be missing from the document.

Most businesses have yet to see net profits return to normal, even with financial help. A large portion of PPP money provided is likely to be forgiven, with the remaining considered income for the business owner. The custodial spouse should take the time to ensure that the remainder is in the net profit category for support purposes.

Most who run their own businesses and using PPC money for its exact purpose (paying employees) are not enriching themselves. That doesn’t mean that the incoming funds should be ignored when it comes to child support calculations. Full disclosure will paint a clear picture and ensure that children receive the financial support they need during life-changing times.