Reporting Maintenance On Your Taxes: Avoid an IRS Headache

Tax season may have come and gone for this year, but don’t put your taxes too far down on your list of priorities just yet. The IRS recently revealed that it is going to start looking more closely at tax returns for divorced couples where maintenance, or alimony, is involved.

The news comes on the heels of a new study that revealed a gross discrepancy between what ex-spouses should be reporting on their tax returns and what they’re actually claiming.

Under the tax code, a spouse who is paying maintenance can deduct those payments each year, while the spouse who is receiving payments must claim that money as income. While payments for child support aren’t considered income and can’t be deducted, alimony payments must be.

A recent report by an IRS watchdog revealed that nearly half of the tax returns from ex-spouses contained discrepancies regarding alimony paid and income reported. The report estimated that over a five-year period, those errors could amount to $1.7 billion dollars. In light of that news, the IRS plans to change its audit filters to catch some of these suspicious returns.

To avoid a potential audit, it’s important to ensure you know what’s required. Here’s a helpful blog regarding how to file a return after a divorce. And it may be helpful to seek out an accountant or someone with specialized experience with these types of returns. 

Read the full IRS story from the Wall Street Journal here.