Alimony tips when it comes to tax time

Alimony payments are an important factor when it comes to filing taxes, as this money can affect the tax return for both the payer and the recipient, according to Cincinnati.com’s BusinessWise.

For the person paying the alimony, these payments can offer some relief on annual tax returns because alimony can be counted as a tax deduction. However, the person receiving the alimony must also report it accurately to ensure that the recipient is claiming the income is received.

Any mistakes on a tax return regarding alimony, may it be a failure to report alimony received or forgetting to put the Social Security number of the alimony recipient, can result in an IRS audit. In addition, the IRS could potentially disallow the alimony paid deduction.

According to MSN Money, tax codes are different for alimony and child support, so it is important to make the correct distinction on tax forms. Payments for alimony are considered tax deductions for the payer and taxable income for the payee, while child support payments are tax-neutral transfers, meaning they are not tax-deductible nor do they count as income.