Can a dentist pay his alimony through his dental practice as if his ex-wife is an employee?
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Can a dentist pay his alimony through his dental practice as if his ex-wife is an employee?
She has never worked in his office but he is paying the alimony in bi-monthly payroll checks. Also put her insurance as if she were an employee. Is this legal or fraud?
Asked on February 10, 2011 under Family Law, New Jersey
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 13 years ago | Contributor
It's fraud. He is defrauding the tax authorities, because he is taking her salary as a tax deduction--a deductible business expense--when in fact she's not working and its a business expense. He's also defrauding the health insurer, since he's buying insurance for her to which she is not entitled. (If he had any business partners or investors and they're not fully onboard with this, he's also defrauding them as well.) He and she both could face significant liability for this.
There are ways to do something similar legally; for example, he could offer her a job (with benefits) as a way to pay or partially pay her alimony; she could accept it; and they could have an agreement setting each one's rights to protect them both. Then as long as she actually is employed by the practice--in such a way that the salary she gets is more or less commensurate wiith the work she actually does--that would be legal. He could also hire her to do freelance work (e.g. marketing, customer service, sales, etc.) as a way to satisfy some or all alimony, and again, as long as its mutually agreed to and above board, that's fine. It's doing things on the sly without having her actually work that creates liablity.
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