La'Rae H. Hendrix P.A.
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DEFINING "ALIMONY" FOR THE PURPOSE OF FILING YOUR TAX RETURN

Well it 's here again. The 2015 tax season is upon us. Some folks have already filed and received their return. Other's (like me) are in the midst of gathering the information needed to prepare and file their 2015 Tax Return. Whether you prepare and file your return on your own, or use a professional tax preparer, the process can be overwhelming.

During the course of my career as a family law attorney, one question that's most often asked is whether alimony (paying or receiving) must be reported on the client's tax forms. The answer is not always clear. Most clients have an impression that alimony or spousal support is automatically tax deductible. Those who receive the payment don't always know if they need to report it. My first response is always to ask their tax expert. My second is that there are some rules that apply. (Which again is why talking to the expert is always best. While I am posed here to give you a little information on the subject, I remind those of you reading this information that I am not a tax attorney or CPA. Therefore your best source for information is to seek the advice of a tax expert.)

Alimony by definition is, "A court-ordered allowance that one spouse pays to the other spouse for maintenance and support while they are separated, while they are involved in a matrimonial lawsuit, or after they are divorced."

For alimony to considered a taxable event, the payments must be made pursuant to a written court order. Whether it is reported as income or a deduction obviously depends on if you are receiving the funds or paying the funds. Nonetheless, voluntary payments under an oral agreement that is not evetually reduced to writing or incorporated into an order are therefore not deductible. Additionally, payments to a third party on behalf of a spouse under the terms of a divorce or separation agreement, might be deductible if they otherwise qualify.

Deficiency in court ordered child support where alimony is also ordered, may change the reportable amount the payor can claim as a tax deduction. Specifically, IRC 71(c)(3) provides any amount of payment toward the alimony obligation of an order, shall not be deductible on the paying party's tax return where the full amount of the child support obligation is not completely satified.

For example, lets say you have support obligations of $1000 per month in alimony and $900 per month in child support, for a yearly total $12,000 and $10,800 respectively. During one month of the taxable year you paid only $450.00 of the $900.00 in child support obligation, leaving you with an arrearage of $450.00. Let's further say that you and your wife agreed to, and a court entered a consent order providing you would pay an extra $50 per month on your child support obligation until the entire arrearage amount was paid in full. However, never paid the $450 and we are in the new year and it is time to file your taxes. In this example, when you report your alimony payments on your tax form you would be required to reduce the total amount of alimony paid from $12k to $11,550K (subtracting the child support arrearage from your total.) This formula would provide the correct reportable tax deductable alimony figure to include on your tax form.

As you can see by the information and example above, reporting alimony payments on your IRS tax filing is not always clear cut. When determining amounts to report, you may find it beneficial to first seek the advice of your tax expert before making an entry that might result in complications down the road.

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