People who are going through a divorce in Wisconsin might be interested to learn how alimony will affect their taxes. The Internal Revenue Service requires all people who pay or receive alimony to report the payments on their taxes. Recipients of alimony must count the payments as income, and payers of alimony may deduct the payments from their yearly income.
For tax purposes, ex-spouses with an alimony order in their divorce decree must share their Social Security numbers with one another. If an individual fails to provide their ex-spouse with a Social Security number, the IRS may require them to pay a fine of $50. Spouses who are receiving alimony are required to report the full amount of alimony that they are receiving as income on Form 1040.
It is important for divorced people to understand what the IRS considers to be alimony payments. In order to be counted as an income deduction, alimony that is paid must be required by a court order. Voluntary payments and payments that are made to divide marital property are not alimony, according to the IRS. Further, the person who is paying alimony must not share the same household as the recipient, and the payments must be made in the form of cash, checks or money orders.
A person who is going through a divorce and seeking alimony payments might want to speak to a family law attorney. An attorney may be able to represent the lower-earning spouse’s interests at negotiations and court hearings. In some cases, the fact that alimony is deductible can help ameliorate the financial consequences to the payer.
