Texas couples who are embarking upon a divorce will face many decisions and challenges through the process. Many of these will be short-lived and over once a divorce is complete. Other family law issues, however, will last for many years after the official finalization of a divorce. Child support, parenting plans and alimony are some examples of the effects of a divorce that can extend well beyond the date that a marriage has ended.
Spousal support payments affect both spouses. The spouse who is ordered to make such payments will need to budget the amounts into his or her finances and the spouse who receives it will need to consider it as any other form of income. When it comes to tax time, this is how the IRS will look at it as well. The paying spouse can deduct all alimony paid from his or her total income while the receiving spouse must claim the alimony as income and pay appropriate income tax on it.
The IRS has indicated that as many as 47 percent of tax returns involving spousal support show discrepancies between the amounts paid and the amounts received. In 2010, the amount of alimony paid on these returns adds up to $10 billion but the amount claimed as received was $2.3 billion less. One of three situations may lead to this. Some recipients may not claim the income at all or they may claim only a portion of it. Additionally, some paying spouses may inflate the amount they have paid.
Even with challenges by the IRS to track such data, it is important to track all information properly. If you are going through a divorce and will be affected by alimony, it can help to discuss this situation with your family law attorney to avoid future problems.
Source: Huffington Post, “Alimony Payment Report: IRS Finds $2.3 Billion Discrepancy On Tax Returns,” Stephen Ohlemacher, May 16, 2014