It’s that time of the year again when many individuals in New Mexico are looking to file their annual tax returns. However, doing so after a divorce can be complex, particularly if alimony is involved. When divorcing couples in New Mexico decided to include alimony in their final divorce decree, both spouses will not only need to follow the order but also consider alimony payments when it comes to filing for taxes each year.
What are the tax implications with spousal support? Because a couple is no longer married, a joint tax return is no longer appropriate. However, even though each spouse is filing their taxes separately, there are some requirements that both spouses need to consider when alimony is currently being paid.
Former spouses receiving alimony payments will have those payments taxed as if those payments were income that year. Because no taxes are held from alimony payments, recipient spouses might want to consider making estimated tax payments or even increasing the amount withheld from their paycheck. If this is not done, the recipient spouse will likely end up owing the Internal Revenue Service when he or she files his or her final return.
A tax deduction is available for former spouses making alimony payments. However, in order for this to occur, the spouse paying alimony must include his or her ex-spouse’s tax ID number on the return. Additionally, the amount of alimony paid must also be reported. This information must match what the ex-spouse reports on his or her return. Therefore, it is important that this information is accurate. Failing to do so could result in penalties.
Divorcing couples that are dealing with spousal support issues or are unsure how to address their current alimony situation when it comes to filing for taxes should take the time to understand the options available. Divorced couples should be sure to timely address any post-divorce issues, in order to avoid any legal issues or disputes.
Source: Fox Business, “Alimony Payments Affect Both Parties’ Taxes,” Kay Bell, Jan. 7, 2013