How does alimony affect my taxes?

Depending on whether you are the person paying alimony or receiving the payments, there are certain tax-related issues you need to understand. While many of these are fairly easy to comprehend, a family law attorney can answer any questions you have about whether you qualify for alimony payments or what happens after the payments are ordered by the court.

For those making court-ordered alimony payments, it’s a good idea to take your allowed deductions. To do this, you will need both the amount of alimony actually paid out that year — which in some cases may be different from the amount ordered — and your ex’s social security or tax identification number.

If you are not on the best of terms with your ex, this may seem difficult to obtain, but your ex-spouse must provide you with the number or face a $50 penalty. The social security or tax ID number is important to include so that the Internal Revenue Service can easily cross-check the two tax returns to ensure that the amount of alimony reported as paid matches the amount reported as received.

For those receiving payments, it’s important to understand that alimony is taxable income but the taxes are not withhold from the payments as they are with most regular forms of income. This means that you will need to estimate the amount of tax to be paid on the alimony and possible adjust your other wage withholdings to make up for this if you wish to avoid owing the IRS. You will also be required to fill out the full 1040 tax form.

Source: Bankrate, “Alimony payments affect taxes,” Kay Bell, accessed Oct. 16, 2015

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