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Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 2846
Experience:  18+ years of experience in tax preparation; 25+ years of experience as a real estate/corporate paralegal.
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Barbara I'm a tax preparer and looking to help my client. He is a US

Customer Question

Hi Barbara
I'm a tax preparer and looking for answers to help my client. He is a US citizen, paying alimony to his ex in Japan. She is not a US citizen. He is going to deduct paid alimony on his return. His Ex is applying for W-7 ITIN number. Do I need to attach the W-7 to his return when mailing in. Apparently cannot efile if the SSN is missing on his return for ex alimony. Trying to find the tax treaty number to enter on the W-7 application
Submitted: 1 year ago.
Category: Tax
Expert:  Barbara replied 1 year ago.
Welcome to Just Answer. My name is ***** ***** it will be my pleasure to assist you with your tax question today.
Alimony paid by your U.S. citizen client to his ex-wife in Japan is deductible on his tax return. You cannot efile the tax return if the there is no SSN or ITIN.
U.S. income tax is imposed on U.S.-source alimony at a flat 30% of the gross amount paid to the nonresident recipient. This is the default U.S. income tax treatment that a nonresident alien recipient of alimony from a U.S. spouse or ex-spouse should expect.
This result, however, can be altered by claiming benefits under a relevant income tax treaty.
The following link contains excellent information regarding alimony payments to non-resident aliens:
http://hodgen.com/alimony-payments-to-nonresidents
Please let me know if you require further information or clarification. In the meantime, I will check the U.S./Japan tax treaty to determine the tax rate (if any) for the alimony paid to the ex-wife.
Thank you and best regards,
Barb
Expert:  Barbara replied 1 year ago.
Further to my initial response, Article 17 of the tax treaty in place between the U.S. and Japan provides that:
3. Periodic payments, made pursuant to a written separation agreement or a decree of divorce, separate maintenance, or compulsory support, including payments for the support of a child, paid by a resident of a Contracting State to a resident of the other Contracting State shall be taxable only in the first-mentioned Contracting State. However, such payments shall not be taxable in either Contracting State if the individual making such payments is not entitled to a deduction for such payments in computing taxable income in the first-mentioned Contracting State.
The alimony payments made to the ex-wife would be taxable in the U.S. so the mandatory 30% withholding would apply.
Best regards,
Barb
Customer: replied 1 year ago.
30% withholding required even if we state we will utilize treaty
I believe spouse is paying taxes in Japan already
Expert:  Barbara replied 1 year ago.
The tax treaty provides that the alimony is taxable in the U.S.
When paid to a nonresident aliem, the IRS treats alimony income as fixed, determinable, annual or periodical (FDAP). This means that payments of alimony income to an nonresident alien are taxable and will be subject to gross withholding at source if the alimony is derived from “US sources”. This is significant because the US payor will have withholding duties. If he fails to meet them he can become personally liable for the tax. Payments of U.S.-source income (such as alimony payments that are considered to have a US source) are also subject to reporting requirements. The payor of the alimony should obtain a Form W8-BEN from the nonresident alien recipient. Part I of the Form contains a certification that the recipient is a nonresident alien and Part II will cover the right to claim treaty benefits, that can reduce or eliminate withholding, if any such treaty benefits exist. The Form W8-BEN is retained by the payor; it is not sent to the IRS. If the alimony is from US sources, withholding will be required by the payor at the 30% (or lower treaty rate).
Please let me know if I can assist you further.
Best regards,
Barb