Kiritsis & Associates

 

3 Tax Issues Regarding Alimony. . -- Kiritsis Law Firm Group 212 922 0005

Apr 27, 2021

When contemplating divorce actions, it may be beneficial; to consider the potential tax issues that may be raised, especially, in regards to alimony.

1. Massive tax law changes in that area. The new tax law signed by President Trump in 2017 (commonly referred to as TCJA, which stands for Tax Cuts & Jobs Act) provided massive changes, in which party shoulders tax liability over alimony, and rips tax benefits.  The changes in this area have not been fully implemented, and they are confusing timing rules, on whether the old or new tax rules apply.

2. Alimony and child support misclassification. Sometimes, parties misclassify alimony and child support, which can have large tax consequences, because each is taxed differently by the IRS, for the taxpayer making the payments, and the one receiving.

3. Disquieted alimony payments. Oftentimes, taxpayers and/or their attorney, come up with alternative ways to structure a payment/distribution structure that will receive optimal tax minimization. Failure of careful planning could in certain instances backfire, in way of a tax auditor, finding that the structure amounts to disguised alimony, and re-compute tax liabilities, accordingly, sometimes, with fines, penalties and/or late fees associated with tax underpayments.

 

Law Offices of Kiritsis & Associates 

Phone # 212 922 0005

Manhattan Office (Main Office):

633 Third Avenue

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