Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax

I am taking my settlement in cash payments (half of his annual

Customer Question
salary) from my soon to...
I am taking my settlement in cash payments (half of his annual salary) from my soon to be ex over 10 years. What tax implications will that have for my ex since it won't be taxed like alimony? Will he have to pay taxes on his entire salary? Or will he pay on only the half he keeps?
Submitted: 6 years ago.Category: Tax
Show More
Show Less
Ask Your Own Tax Question
Answered in 2 minutes by:
9/3/2011
Tax Professional: Lev, Tax Advisor replied 6 years ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,146
Experience: Taxes, Immigration, Labor Relations
Verified

LEV :

Hi and welcome to Just Answer!

Customer:

Hi, thank you

Customer:

Do you need more information from me?

LEV :

You need to be clear about classification of these payments - if that is a property settlement - generally it is not taxable - but if that is alimony - they should be included into your taxable income and deducted for the payer.

Customer:

I understand, but, I understand that if you so designate in the divorce papers that the alimony is not taxed with the understanding that the payor will not get a tax benefit it is doable.

Customer:

I'm wondering what the tax ramifications will be for my ex

Customer:

For instance, if he makes 100k and gives me 50k of that will he still pay taxes on the 100k? Or just the 50k he keeps?

LEV :

See for reference the IRS publication 504 - http://www.irs.gov/pub/irs-pdf/p504.pdf
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.



Customer:

I have all of that information. It does not address my question.

LEV :

Your divorce decree may not override the tax law. If payments are alimony - these payments are taxable regardless if your divorce decree said otherwise.
Your only concern should be it this is an alimony or not.

LEV :

If payments are classified as alimony - they are deductible for the payer and taxable for the recipient.

Customer:

Please read further in 504

Customer:

Payments designated as not alimony. You and your spouse can designate that otherwise qualifying payments are not alimony. You do this by including a provision in your divorce or separation instrument that states the payments are not deductible as alimony by you and are excludable from your spouse's income. For this purpose, any instrument (written statement) signed by both of you that makes this designation and that refers to a previous written separation agreement is treated as a written separation agreement (and therefore a divorce or separation instrument). If you are subject to temporary support orders, the designation must be made in the original or a later temporary support order.

Your spouse can exclude the payments from income only if he or she attaches a copy of the instrument designating them as not alimony to his or her return. The copy must be attached each year the designation applies.

This is from IRS Publication 504.

Customer:

Whether or not we will classify this as alimony is not the question. Sounds like you haven't run into this before. Maybe I should ask someone else?

Customer:

My question-again- is what are the tax implications for my ex if we structure our settlement in this manner?

LEV :

Your divorce decree may have a clause that these payments are not alimony - that is correct - if that is true - payments are not alimony - see requirement #2 as I stated above. In this case the payer may not deduct these payments as alimony.
Then - you need to verify if these payments are property settlement or a gift.
If that is a property settlement - there will not be any tax implication for either of you.
If that is a gift - the donor might be required to file a gift tax return.

Customer:

So, as I asked above, if he makes 100k and gives me 50k of it for settlement, will he be required to pay on his original salary of 100k? Or does the fact that he is paying a divorce settlement allow him to pay taxes only on the 50k he keeps?

Customer:

Or will he be able to write anything off his end of the year taxes?

LEV :

Property settlement payments are not deductible - he will be taxable on full income - 100k in your example.

Customer:

Thank you

LEV :

Correspondingly - these payment will not be taxable to you as a recipient.

Customer:

Yes. That is my understanding

LEV :

Property settlements may not be treated as alimony. Only payments that met all mentioned above requirements may be classified as alimony and treated as such.
There are many situations when the IRS disallow deductions because payments were incorrectly classified as alimony.
If you are working out the divorce decree - I suggest to have a tax professional review it. There are many situations when divorce attorneys overlook tax issues.

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,146
Experience: Taxes, Immigration, Labor Relations
Verified
Lev and 87 other Tax Specialists are ready to help you
Ask your own question now
Ask Lev Your Own Question
Lev
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,146
30,146 Satisfied Customers
Experience: Taxes, Immigration, Labor Relations

Lev is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,310 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,695 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
In the new GOP tax plan, Alimony payment will no longer be a
In the new GOP tax plan, Alimony payment will no longer be a tax deduction for the paying spouse. Does the receiving spouse still need to pay tax on it? If that is the case, it would be double taxatio… read more
abci168
abci168
Principal
27 satisfied customers
Suppose my taxable income in 220,000 this year and the tax
Suppose my taxable income in 220,000 this year and the tax rate is X up to 200K, but Y for 200and over, do I pay Y on the full 220K or just that above 200K? … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Can I report rental income in my tax return on a property
Can I report rental income in my tax return on a property thar is owned by my father? He does not live in the US is not a US citizen and can sign a document to allow me to receive the rental… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
Dose mean can not deduct state income taxes only or dose it
dose mean can not deduct state income taxes only or dose it includes property taxes too … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Under current law a 100,000 taxable income pays $10,365 plus
Under current law a 100,000 taxable income pays $10,365 plus 25% of the amount exceeding $79,400 i.e. about $16,000. Under tax reform will the tax be $25,000? … read more
Lev
Lev
Tax Advisor
30,146 satisfied customers
Form 1120, cash basis. If Taxes paid to IRS are deductible,
Form 1120, cash basis. If Taxes paid to IRS are deductible, are refunds for overpayment the equivalent of income?… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
734 satisfied customers
Information on Gift tax return. My 100 year old mother wants
my 100 year old mother wants to gift the balance of a home loan to my brother, Balance is aprrox $35,000. What are the mechanics? … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,473 satisfied customers
If your taxable income is $0 (actually negative) is there a
If your taxable income is $0 (actually negative) is there a penalty for late filing? Do you need to file at all? What is the 2016 filing deadline with an extension?… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,473 satisfied customers
I missed deducting something on my return this year for my
I missed deducting something on my return this year for my corp s , can include it on next years?… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
You may recall that tax deductions are only deductible by
You may recall that tax deductions are only deductible by the legislative grace of Congress. After this lesson, you might have realized that Congress was pretty generous with the types of business exp… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,473 satisfied customers
Can house maintenance and property taxes be deducted on form
Hello. Can house maintenance and property taxes be deducted on form 1041 for a house owned by decedent prior to the Executors selling it? … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Is it allowed to not include a deduction of my fed return
is it allowed to not include a deduction of my fed return that increases my tax on my city return?… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Undistributed taxable income previously taxed. Have 3
Undistributed taxable income previously taxed. Have 3 shareholders with balances due to them from previous years. Can it be paid all in one year to bring their amounts owing to zero until the next pro… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,220 satisfied customers
Ok Chad - Based on liability there is case law that whatever
Ok Chad -Based on liability there is case law that whatever entity comes in first is the one that gets paid first ...So I've had court orders for child supp since 2013. The $3M tax deficiencies are no… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
734 satisfied customers
I would like clarification on the IRS tax deductions and a
I would like clarification on the IRS tax deductions and a rental property I purchased recently. … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
Divorce taxation (asset splits and alimony) question: can
Divorce taxation (asset splits and alimony) question: can alimony/maintenance be equalized with assets in the following structure, from an IRS perspective? Alice and Bob have $200k in assets as a marr… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
If you get a lump sum alimony payout in a divorce is that
if you get a lump sum alimony payout in a divorce is that taxable to me … read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,220 satisfied customers
I filed a joint return through TurboTax. My taxable income
I filed a joint return through TurboTax. My taxable income was $87,829. Using the IRS's published tax rate schedule, the tax I owe should be $13,499.25. TurboTax calculated I owe $17,787 (this compare… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x