Tax Considerations in Divorce
with Paul Piasecki
Your filing status: (married/joint, etc.) is determined on the last day of the year. So, whatever you are on 12/31 determines how you are taxed. If you get pendente lite (pre-divorce alimony), that is considered taxable income for the receiver, or a deduction if you’re the one paying. You should pay taxes on this quarterly or you’re subject to penalties.
Unallocated alimony or support is fully taxable because you’ve lumped child support and alimony together. If you take it instead as two payments, alimony and child support, you can take a deduction on the child support. There are different strategies on how to take that payout that an attorney or accountant can review, but it may be a way to ‘create dollars’ depending on your respective tax brackets if you work together. And if you need another reason to work together it’s this: audit. When your numbers don’t match with your ex’s numbers, that flags the IRS to a potential audit.
And if you’re still confused like we were, the IRS has a publication called a 504 at www.irs.gov It will answer all your questions for free.