• 09
  • December
    2011

Alimony payments are often necessary for the long-term financial security of the person receiving them. However, the recipient needs to be certain to follow the Internal Revenue Code and properly report all alimony income on his or her tax filings.

Unlike child support payments and property settlements, alimony in Maryland and across the United States is generally considered taxable income for the person receiving it and a tax deduction for the person paying it. Only payments made after the formal split count. If the payments are not part of a written separation agreement or a divorce decree, they do not need to be reported as income and cannot be used as a deduction.

Once the divorce or separation is final, former spouses who pay alimony can report it as a tax deduction, as long as court documents stipulate the payment is alimony. The payment cannot be listed as child support or a property settlement. In order to qualify, the person paying the bill must pay his or her former spouse with cash, which includes checks and money orders.

Because the person paying alimony is likely reporting it on his or her tax filing, it is important for the person receiving it to report all payments on his or her tax returns. Failure to do so is likely to result in an Internal Revenue Service audit.

To keep track of alimony payments, the IRS asks the person paying alimony to include the former spouse's social security number on the tax return. On Form 1040, the proper place for that information is line 31b. Failing to provide that information may mean that the tax deduction is denied. Also, the payer may be subject to a $50 penalty.

If the person receiving alimony refuses to provide his or her former spouse with his or her social security number, he or she can be subject to a $50 penalty.

Source: Forbes.com, "Seven Key Things Women Need to Know About the Tax Implications of Alimony Payments," Jeff Landers, Nov. 30, 2011