Many St.
Paul residents who have undergone a significant change in 2011--such as a divorce--are
likely beginning to find out some of the resulting tax implications.
A change
in your legal relationship status can have several effects on your federal and
state tax returns. Two of the major issues are whether you should file
separately or with your ex-spouse, and how child support or alimony should be
reported as income and deductions.
The
first item is highly personal. Whether you should file jointly, as a single or
as a married couple filing separately depends on where you are in your divorce
proceedings and your own financial portfolio. This is a matter best decided
with your personal finances in mind, and the guidance of your family law
counsel and/or accountant.
The
latter is simpler. Alimony is reported on the federal 1040 form as income for
the recipient and as a deduction for the payer. However, there are many
qualifications that spousal support must meet in order to be considered as
alimony by the IRS. To include alimony on your tax return: you must be divorced
or under a separation order; you must not be living with your ex while payments
are being made, unless a court order says otherwise; you cannot claim alimony
if you are filing a joint tax return with your ex; and you must have a legal
agreement requiring the payment of spousal support, among other things. And,
payments that could be considered as child support will not qualify as alimony
to the IRS.
Child
support is neutral for tax purposes. This means that it is neither to be
claimed as income for the recipient nor as a deduction for the payer. It is
also important to note that if any child support is past due, the IRS will then
count alimony payments as child support for tax purposes. This means that the
payer may lose the deduction.
Many
Minnesota laws as well as federal Tax Code complexities can, of course, affect
one's federal and state tax status. It is thus important to seek personal
counsel about your unique tax issues.
Source: Forbes, "Taxes From A to Z: A Is For Alimony,"
Kelly Phillips Erb, March 3, 2012
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