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Alimony and taxes: What one has to do with the other

It's coming upon that time of year when many Kentucky residents are preparing their tax returns. This year will be different for those who were divorced and began receiving alimony in 2016. Various issues can arise if one is not fully aware of all tax laws and how spousal support may impact one's tax return.

Those on the paying end of alimony may actually be glad when tax season rolls around. This is because they can claim their payments as deductions. The Social Security Number of the recipient is used by the payer, who gives the number to the Internal Revenue Service so it can verify the amount claimed.

For a person receiving alimony, it counts as income and must be reported as such when filing taxes. Since taxes are never withheld from alimony payments, the recipient may be required to remit estimated tax payments during the course of the year. Another option would be to increase the amount of funds withheld from a paycheck to counterbalance any alimony payments. Receiving alimony payments also affects which form a person uses to file taxes. Alimony is included on the 1040 long form; accordingly, those previously filing short forms would need to switch to long forms when declaring alimony payments of any kind.

Penalties may be incurred by anyone who received alimony payments but refused to provide the payer with a tax ID number. Similarly, a payer reporting alimony on his or her tax return may be penalized if the ID number is missing. Child support, however, is not subject to deduction or taxation. Enlisting the help a Kentucky family law attorney may prove beneficial when questions regarding tax laws and spousal support arise.

Source: finance.yahoo.com, "How alimony affects taxes for you and your ex", Kay Bell, Feb. 10, 2017

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