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Alimony payments scrutinized by Internal Revenue Service

Many factors can contribute to the breakup of a marriage, from the unavoidable stresses of daily life to infidelity of one or both partners. Whatever the cause, the decision to divorce is never an easy one, and this is certainly the case in Connecticut as well as in other parts of the country. One of the issues a couple must factor in when going through this process is alimony.

When a judge rules that one of the partners owes spousal support to the partner who earns less that level of support must be paid so that the partner's standard of living is not lowered considerably following the divorce. According to the IRS, however, not all spouses are honest about the alimony that they pay out or receive. Because alimony paid to ex-spouses can be deducted directly from income, it ultimately lowers the person's taxable income. However, the income that recipients of alimony receive does not always match up with the numbers reported by those paying alimony.

According to the IRS Inspector General, $10 billion was reported as being paid in alimony in 2010; in the same year, former spouses only reported receiving about $8 billion in aid. However, there is little clarity on the origins of this discrepancy, as it could stem from either under or overreporting from either of the involved parties. There were several cases, for example, where one partner documented paying out support payments, while the alleged receiver did not factor receiving such payments into their own return.

Divorce can be a difficult and stressful process; between child custody and financial arrangements, considerations of alimony and spousal support complicate this difficult issue even further. However, even if you are caught up in this difficult process, there is no reason to feel discouraged. If you plan and inform yourself regarding current state legislation, you can ensure the best possible outcome for your situation.

Source: CTpost, "Ex-spouses tell IRS different stories on alimony," Stephen Ohlemacher, May 15, 2014

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