The IRS has announced areas that will be given extra scrutiny and one area is alimony (both paid and received). My opinion is the updated IRS computer systems are able to match information between personal returns, like they have been able to with payroll info (W2, 1099 or 1098 forms, etc.). With this cross-checking of info, discrepancies, such as alimony paid or received would be easier to spot and track.
Alimony (sometimes called spousal support) is a payment from one person to another for the maintenance (i.e. living expenses) of the recipient. By law, alimony is income to the recipient, and a deduction to the payer. The payer reports the amount of alimony as a deduction to their Total Income to arrive at Adjusted Gross Income (bottom third on the first page on form 1040 – shown below). The recipient reports the money on line 11 on the form 1040 (Alimony Received).
Please note this does NOT have anything to do with child support – those payments (for the benefit of any child or children) are not taxable to the recipient nor a deduction for the payer.
So, why the need for extra scrutiny? Conjecture is the IRS looked at the amount of money claimed by the payer and compared it to the amount claimed by the recipient, and discovered enough discrepancies to warrant extra attention. I’ve heard of people who’ve accidentally claimed the child support as alimony, and also people who intentionally overstate their payments (payer) or don’t report alimony as income (recipient). In addition, since individuals are generally calendar year basis taxpayers, if there was a delay in getting a payment between December & January, that could cause a variance. Whatever the reason, there must be enough of a difference to have the IRS name alimony out as an item to investigate.
In the past, I’ve had a client audited who paid alimony, and I brought a copy of divorce decree, year-end pay stub (showing monies being withheld by his employer) and a record from his employer showing payments made to his ex-spouse. This was more than enough to prove his side – if the IRS looked at the return of the ex-spouse, I have no idea.
If you find a letter from the IRS asking for information on alimony, it will probably be a correspondence audit where the IRS is requesting additional information. Don’t ignore it – try to send the IRS whatever information they ask for. If you have questions, be sure to contact your tax professional for advice.
If you have any questions or comments, including suggestions for other tax topics, please leave them in the contact form below.
Thomas C. Hodge, CPA
The Hodge Group
3040 N. Menard Avenue
Chicago, IL 60634