Hi and welcome to Just Answer! 1) If I file an amended return for 2011 where I deduct some of what I paid her as alimony how does the IRS handle the fact that she did not declare that alimony as income? When you deduct alimony payments - you must report your spouse's information (Name, Address and SSN). The IRS simply match that information and because she doesn't report alimony on her tax return - you will get a letter asking to provide supporting documents for your deduction - as you correctly referenced in the IRS publication 504. If your supporting documents will be accepted - your wife will be similar letter asking either to pay additional tax liability or provide documents that these are not taxable payments. If your documents will not be accepted - you will be assessed tax liability, penalties and interest. That is how the IRS would handle that hypothetical situation. 2) If I amend my return, I assume she would have to amend hers? What if she refuses to do so? As I mentioned above - the first step the IRS would do - validate your deduction. Based on the results - either your deduction will be disallowed or she will be assess additional tax liability. When the IRS assesses the tax liability - and the taxpayer agree with changes proposed by the IRS - no amended return will be needed - the IRS will do all required changed on the tax account.3) Would my amended (but disputed) return force an audit on hers or both of our returns?That is not an audit. The IRS will just validate one deduction - and you will be asked to provide supporting documents. If your documents will be accepted and the IRS will accept your amended tax return - there will be the second step - the IRS will add the amount of alimony to your wife's taxable income and will calculate additional tax liability. In this case your wife will get a letter asking either to pay assessed liability or to provide her arguments. Normally she would be given 60 days to respond - and if not - the IRS will start collection of her assumed tax liability.
So obviously the first step is that I file my amended return.
The first step I would suggest to verify if you have solid supporting documents. If your documents might be not accepted by the IRS - you better not to amend your tax return and avoid complication.
Can I go ahead and provide the supporting documentation at the time I submit my amended return or do I have to wait for them to ask for it?While you are not required - you may attach copies of supporting documents to your tax return - for payments - to be treated as alimony - please see IRS pub 504 - www.irs.gov/pub/irs-pdf/p504.pdf - your supporting documents MUST proof all these requirements.
What kind of supporting documentation will they require?Alimony Requirements. A payment to or for a spouse under a divorce or separation instrument is alimony if the spouses do not file a joint return with each other and all the following requirements are met.-- The payment is in cash.-- The instrument does not designate the payment as not alimony.-- The spouses are not members of the same household at the time the payments are made. This requirement applies only if the spouses are legally separated under a decree of divorce or separate maintenance.-- There is no liability to make any payment (in cash or property) after the death of the recipient spouse.-- The payment is not treated as child support.
So after they receive the supporting documentation, they decide whether or not they agree that I am able to deduct some or all of that money? Correct?
Yes - that is correct.
If they agree, they then contact my wife and inform her that an additional tax liability will be added to her return and request that she pay any money owed at that time?