The deadline for filing your income taxes is quickly looming. While some residents in Albuquerque may be daydreaming about what they’re going to do with their anticipated tax refund, they should keep in mind that they must report all sources of income. The failure to do so could lead to tax problems down the road.
Of course, it may seem obvious that income earned through work needs to be reported. However, for some divorced couples it doesn’t end there. What they may not know is that if they are paying or receiving alimony — also known as spousal support — they may need to report so on their taxes.
If a person receives alimony, he or she must report it as income on his or her tax return. Likewise, under certain circumstances a person who pays alimony can deduct these payments on his or her tax return. Alimony payments can be deductible if the following requirements are met.
First, the paying spouse and the receiving spouse cannot file jointly with one another. Alimony payments must be made via check, cash or money order. The divorce decree must not contain language saying that these payments are not to be considered spousal support. The receiving spouse and the paying spouse cannot reside in the same household while alimony is being paid. There must not be any responsibility to continue making payments once the receiving spouse passes away. Finally, spousal support payments cannot be treated as if they were payments made for child support.
When filling out one’s federal income taxes, the receiving spouse must include all of his or her spousal support payments on line 11 of Form 1040. In addition, the receiving spouse must provide his or her Social Security number to the paying spouse, or else the receiving spouse will be hit with a penalty of $50.
Accounting for alimony payments on your income taxes may not be in the forefront of your mind when going through a divorce. However, it should not be overlooked. There could be serious consequences if a spouse fails to report alimony payments on his or her tax return. Moreover, a paying spouse could miss out on a valuable deduction if he or she fails to account for alimony paid on his or her tax return. Those with questions about alimony and taxes may want to seek legal help.
Source: FindLaw, “Alimony and Taxes,” accessed on March 26, 2017