Although courts have been less inclined in recent years to grant alimony (spousal support paid from one partner to the other on an ongoing basis following a divorce), there are some scenarios in which it is more commonly awarded, such as when one partner was responsible for the vast majority of the couple’s combined income or when one spouse left the workforce in order to take care of children or manage the household. If there’s no substantial difference between one spouse’s income and the other, alimony payments often isn’t awarded.
In situations in which alimony is granted, there is always the possibility that an objection regarding the payments will be raised afterwards.
Since alimony payments may be tax deductible for the payer and may be taxable income for the person receiving the payments, an objection can come from one of the ex-spouses or from the Internal Revenue Service. Thus, it is especially important you have the proper documentation concerning the payments. Note: The rules regarding deduction of alimony by the payer and inclusion in income of the receiver changed with the Tax Cuts and Jobs Act of 2017.
When someone is objecting to the tax treatment of the payments, certain forms of documentation can make all the difference, whether you’re the one writing the checks or the one cashing them.
For those paying alimony, don’t take anything for granted. Keep a list documenting every single payment, including specific dates, amounts, and the complete address to which the check was mailed. Keep the originals of payment checks somewhere safe and secure and keep track of the month each check was for. If paying cash, get receipts from the recipient.
For alimony recipients, the date, amount, check number, account number, and bank name should all be documented upon receiving payments. A photocopy of each check should be made as well. If the payments are in cash, be sure to make a copy of any signed receipts.
Keep your records for at least three years from the date you filed your original return or two years from the date you paid the tax, whichever is later.
Do You Need Help With Alimony Payments?
If you have questions about your specific situation, contact our tax professional at Sodowsky Law Firm, PC.