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When claimed incorrectly, alimony can bring tax woes

At the end of a marriage, one spouse is often expected to continue to provide financial support to the other. This obligation, known as alimony, is an aspect of divorce that many in Texas in a cloud of dread. It is unavoidable in many cases, however, leaving the spouse who pays in search of a silver lining.

That relief may come in the form of the tax deduction available to those who pay alimony. While each individual has his or her own tax landscape, the alimony deduction can make a significant positive impact for some former spouses. However, it is important to know that tax returns that contain notations of alimony can trigger an audit by the Internal Revenue Service.

When an individual claims the deduction, he or she must submit the Social Security Number for the individual to whom those payments are made. The IRS can then check to see that the recipient is claiming the same amount as additional income, and is being taxed accordingly. In practice, these numbers are often different, which could lead to closer examination by tax authorities.

There is little that a Texas resident can do to ensure that his or her spouse is claiming the proper alimony amount on their tax returns. It is possible to share one’s alimony calculations with the other party, in the hopes that he or she will claim the same amount. However, understanding the potential audit triggers that can accompany an alimony deduction should serve as a warning to make sure that each area within one’s tax return is accurate.

Source: Forbes, "Alimony Deduction Requires Good Substantiation", Peter J. Reilly, Aug. 13, 2014

Source: Forbes, "Alimony Deduction Requires Good Substantiation", Peter J. Reilly, Aug. 13, 2014

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