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What you need to know about reporting alimony on your tax return

If 2016 was your first year either paying alimony or receiving it, there are some important things to know about reporting it on your tax return.

For instance, if you were previously able to use a short form, you'll no longer be able to. Alimony needs to be reported on the Internal Revenue Service's long Form 1040.

Proper planning for alimony reporting on your taxes begins with the divorce decree. The amount of spousal support should be spelled out clearly and be separate from child support payments (which are not reportable for either party).

It's essential that both the payer and the recipient list the same amount of alimony on their tax return. Include only the designated alimony amount. Do not include any gifts, loans or additional money received from or given to your ex.

The person who paid the alimony must provide the Social Security number of the recipient so that the IRS can cross-check the amounts to make sure they match. If a payer fails to report that number on the tax form, he or she could face tax penalties. The same is true for recipients who fail to provide that number to exes.

Alimony is reported by the recipient as taxable income. Because taxes aren't taken out of the payments when they're made as they are with paychecks, you could owe a hefty amount to the IRS unless you make estimated tax payments throughout the year or adjust your deductions with your employer.

If this is your first year filing taxes since your divorce, especially if your spouse handled that chore when you were married, it may be wise to consult a tax preparer (and probably not the same one used by your ex-spouse).

It may be one more expense you don't need, but it could save you penalties. Tax preparation services are also deductible on next year's return. Your family law attorney can likely recommend a good tax professional in your area.

Source: Yahoo! Finance, "How alimony affects taxes for you and your ex," Kay Bell, Feb. 10, 2017

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