TIGTA Report Reveals $1.7 Billion Alimony Tax Gap


Divorce law in Pasadena views alimony payments as an important source of income for lower earning spouses after a divorce. Alimony payments allow the lower earning spouse the flexibility needed to establish an independent financial life by going back to school for additional training, opening a new business, or simply returning to the workforce after having raised children.

A new report by the Treasury Inspector General for Tax Administration (TIGTA) reveals that a shocking number of people are not reporting alimony payments properly on their taxes. The report found that almost half of all tax returns with an alimony deduction had no corresponding alimony recipient reporting income or that the income amount did not match the deduction that was taken. Experts estimate this discrepancy could cost the Treasury as much as $1.7 billion in lost tax revenue over the next five years.

The IRS clearly states that alimony is taxable income for the recipient and a tax deduction for the person making the payments. Alimony payments are reported on line 31a of Form 1040, with the recipient's Social Security number or taxpayer identification number on line 31b. Alimony income is reported by the recipient on line 11 of Form 1040. If everything is reported correctly, the numbers on both returns will match. Child support income is neither a tax deduction nor reportable as income to the recipient.

Returns are currently audited for the improper reporting of alimony, but only if the deduction is over a certain dollar amount. However, with the results of the most recent TIGTA report indicating a substantial loss of needed tax revenue, the IRS says it will be working to improve the filters used to catch questionable alimony deductions and provide better enforcement when improper returns are filed.

How Can We Help?

If you have questions about alimony payments relating to your Pasadena divorce, please call our office at (626) 683-8113 or email us at info@PasadenaLawOffice.com. Our experienced attorneys can help with getting an initial alimony order in place as well as handling requests to modify or terminate alimony after your divorce is finalized.