The month of April may signal the arrival of spring, but it is also the deadline for most people to file their taxes. For couples who have gone through or are in the midst of a divorce, there are several issues which may come up that could have a significant issue on federal income taxes. One of those issues is spousal support, and unlike child support, spousal support is considered to be taxable income according to the Internal Revenue Service (IRS).
Under the tax laws, any payment that meets the falling criteria is considered to be spousal support and therefore, the receiving spouse needs to claim it as income on their tax return:
- The spouses will be filing separate, not joint, tax returns;
- The payments made by one spouse to the other are “cash” payments. It is important to note that payments can be made via checking account, bank check, or money order;
- One spouse is making the payment to their former spouse;
- The spouses do not live in the same residence while these payments are made;
- The payments are separate from child support payments, and they also have nothing to do with any property settlement which may have been awarded to the spouse in the divorce settlement;
- There is nothing in the divorce decree (or legal separation agreement) which specifies that the payments are not spousal support payments;
- If the spouse receiving the payments dies, there is no legal requirement for the spouse who is paying to continue to make those payments.
Whereas the spouse who is receiving the spousal support is required to pay taxes, the spouse who is required to make those payments is allowed to use those funds as a tax deduction. In order to take the deduction, the IRS does require that the receiving spouse’s social security number be included. Their tax ID could also be used instead. If the paying spouse fails to provide either number, then the IRS could disallow the deduction. Refusal of the receiving spouse to give their social security number to the paying spouse could result in a tax penalty for the receiving spouse.