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Reporting alimony on your tax return

If you are paying or receiving alimony for the first time this year, be prepared for your return to get a little bit of extra scrutiny from the Internal Revenue Service. That's because, in recent years, the IRS has found a number of inconsistencies between what those receiving alimony report and what their exes list.

Regardless of what your relationship is with your ex, this is an area where you (or at least your lawyers or accountants) need to communicate to ensure that you are reporting the same amount. If you don't, you could find yourself being audited and paying a penalty. The IRS has audit filters in place to catch instances where the amounts don't match or where one person reports paying alimony, but the recipient doesn't report it as income.

Sometimes the discrepancies stem from confusion over exactly what alimony is. You should have this detailed in your divorce decree. Additional gifts, as well as child support, are not considered alimony and should not be reported as income by either party.

Some people have alimony payments deducted electronically from their paychecks. That can make tracking and documenting it easier. But however it's done, it's important to retain some sort of documentation that you can produce if necessary.

If you receive alimony, it needs to be reported as an income source. Again, documentation is important.

As noted, it's best to clarify exactly how much alimony is to be paid when you finalize your divorce. If you have any questions about money you've paid to or received from your ex, your family law attorney and/or your tax professional can provide guidance.

Source: Ventura County Star, "Alimony falls into the IRS spotlight," Sandra Sunken, April 07, 2017

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