There are several issues at stake when a couple chooses to end their marriage. An Illinois attorney can help parents determine custody of children as well as child support payments. In many circumstances, a spouse will seek alimony. The income can help an individual get on his or her feet after a divorce or ensure that the ex-spouse can enjoy the lifestyle he or she grew accustomed to. However, there are certain regulations that govern how alimony is reported come tax season, and thousands of individuals aren’t following the code.
There is a $2.3 billion gap between what paying individuals and receiving individuals are reporting on their taxes, according to the Treasury Inspector General for Tax Administration. Taxpayers who receive notices about other potential errors, such as claiming dependents, have been found to rectify the issue on the next year’s return. The TIGTA has suggested that the IRS do the same for those with alimony discrepancies.
According to the agency, nearly 570,000 people claimed alimony on their returns in 2010 as a tax write-off. However, in nearly half of the cases, the numbers on one ex-spouse’s return didn’t match the numbers on the other ex-spouse’s return. This has potentially left the U.S. Treasury out of $1.7 billion over the last five years. To boot, there is a $50 fine that should penalize individuals who do not provide a taxpayer identification number for recipients. However, the IRS has not been collecting the fee or has been grossly undercharging individuals, resulting in a loss of $325,000.
Couples who are trying to work out alimony issues should consult an attorney for assistance. There are legalities that apply to the payments, and a lawyer is best-suited to help individuals navigate the process.
Source: Forbes, “Alimony Tax Gap is $1.7 Billion,” Ashlea Ebeling, May 15, 2014