Not every Wheaton separation or divorce includes support payments to ex-spouses. When alimony is part of separation or post-marital agreement, each party has an obligation to account for payments on tax returns. How the payments apply to a tax situation depends upon whether you are a payer or recipient.
The payments are taxable income for the person who receives spousal maintenance. The former spouse making payments generally is entitled to tax deductions. In both cases, tax agencies like the Internal Revenue Service and family courts want proof of transactions to support claims during a tax or legal dispute.
Alimony payers and recipients are advised to keep track of payment dates, amounts, methods of payment and receipts. The records may show variances – the date an alimony check is written may differ from the date an ex deposits a check. Record-keeping should include relevant check or account numbers, addresses, bank names and copies of physical evidence — cashed checks, money orders and signed and dated receipts, especially when transactions are in cash.
Spousal support record-keeping diligence may seem tedious, unless you’re called for an IRS audit, you or an ex file for a modification of alimony terms or a dispute over back payments occurs. Then, the purpose for all those detailed records becomes very clear. You have evidence needed to back up the claims of paid and unpaid support.
Advisers suggest keeping alimony records for a minimum of three years, the IRS standard for tax audits. However, older tax filings may be used when serious errors are found. Since the IRS isn’t the only authority that may question spousal support payments, some advisers recommend hanging onto documentation indefinitely.
Attorneys may not have all the tax answers you need any more than financial counselors have all the legal solutions. You may need the customized advice or more than one professional to understand why and how to track alimony.
Source: Find Law, “Alimony Guidelines: What Records to Keep Regarding Your Alimony” Aug. 12, 2014