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Divorce CPA discusses reporting Alimony on lines 11 and 31a of 2014 IRS 1040

alimony CPA, divorce CPA

Looks like alimony tax cheats get away with it. (910) 399-2705.

Divorce CPAs gasped at a new IRS report that states 47% of returns presenting alimony paid (line 31a of Form 1040) and alimony received (line 11 of Form 1040) don’t match. The report showed an “alimony gap” of $2.3 Billion; the IRS lost $2.3 Billion of taxes from alimony recipients not reporting the alimony as income, and alimony payers claiming false alimony deductions. The IRS stated that although Form 1040 requests corroborating Social Security numbers, they don’t actually use them.

So, why are divorce CPAs shocked? The IRS maintains an excellent revenue matching program. They look to see, for example, if a Form w2, they received from your employer appears on your tax return. That revenue matching program includes Form 1099-C, Cancellation of Debt, Form 1099R, Form 1099-MISC, Form 1099B etc. If there’s a discrepancy, their computers generate an IRS CP2000 Notice. It appears to me the IRS could easily cross correlate alimony payments and alimony receipts but doesn’t.

Common Alimony Issues/facts

  • One common alimony question I’m asked as a Divorce CPA concerns how Clients want to re-structure child care payments, which aren’t tax-deductible, into alimony payments which are.
  • Conversely alimony recipients ask to restructure alimony payments, which are taxable, into childcare payments which aren’t.
  • My impression is that some divorced Folks shop around for divorce CPAs who don’t require a copy of the divorce decree.
  • Alimony is now used for common law marriages.
  • Males are seeking alimony more often.
  • Permanent alimony is less common.
    • Rehabilitative alimony is now common.
    • Temporary maintenance alimony is more common.
  • It’s harder to avoid alimony payments once they’ve been awarded.
    • Leaving the State doesn’t work as often.
    • New alimony collection techniques, like QDROs make collecting back alimony easier.

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