Every year, you have to file your taxes, and if you pay or receive alimony in Illinois, you may be wondering how you report it to the IRS. The short answer is that you must report it, but the IRS may define alimony a bit differently than you or the courts. At Lois Kulinsky & Associates, Ltd., we understand that this can be a little difficult to understand. However, it is essential to make sure you are clear on how to report alimony on your taxes.
To begin with, the IRS defines alimony as money received as part of a divorce. This is a fairly broad definition that may include money you would not otherwise think of as alimony. Thankfully, there are specific requirements that qualify something as alimony. There should be no liability to pay further if the recipient passes away. It should not be child support or a payment made in cash. In addition, you cannot file a joint return or live with each other when the payment is made. Finally, the payment should not be specified as non-alimony in your divorce papers but must be made under an order from a divorce document.
Understanding what is alimony is only the beginning. If you are receiving it, then you have to report it as income when you file your annual tax return. If you are the one paying, then you can deduct the payments on your tax return. Also, to avoid a fine, if you are receiving alimony, you have to give your social security number to your ex-spouse and your ex-spouse has to provide it on his or her tax returns. To learn more about alimony, please visit our website.