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Law Tutor, Esq.
Law Tutor, Esq., Lawyer
Category: Family Law
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In a one-time alimony payment, calculated as a settlement

Customer Question

In a one-time alimony payment, calculated as a settlement for seven of the fourteen years of marriage, can the income tax on it be spread out over a period of seven years??
Judi Thomas
Submitted: 10 months ago.
Category: Family Law
Expert:  Law Tutor, Esq. replied 10 months ago.

Hello. I am an attorney with over 20 years of experience and I look forward to assisting you today. I would be happy to provide general information regarding your question.

Expert:  Law Tutor, Esq. replied 10 months ago.

If you are the spouse or former spouse who is receiving the lump sum alimony payment you must report the full amount as income on your Form 1040 U.S. Individual Income Tax Return in the tax year that it is received. How the court calculated the lump sum figure, i.e. seven of the fourteen years, unfortunately has no bearing on the issue. Here is a link to the the IRS's publication regarding Topic 452 - Alimony Paid. I would recommend that after you file your taxes, that you contact the IRS to make a payment arrangement for the amount of taxes you may end up owing. Also, you may want to consult with an accountant/CPA to get an idea of what amount you may be able to put aside out of the lump sum alimony payment to take of the taxes when they become due. I hope this helps. Do you have any other questions? If I have not answered your question to your satisfaction, please reply and give me the opportunity to assist you further.

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Expert:  Law Tutor, Esq. replied 10 months ago.

Here is some additional information for you concerning the subject. Internal Revenue Code Section 71(b)(1)(B) provides that a divorce or separation instrument may specifically exclude an otherwise taxable alimony payment from taxable income. If the lump sum alimony payment is specified as being non-taxable, you would save a substantial amount in income taxes. Please review your decree carefully to see if this language is present. Also, the IRS has a "recapture rule". Here is a link to an example of how recapture works. Also, please consult with your accountant as soon as you can. I hope this helps.