Alimony – Un-Alimony

Today TaxMama hears from Mimi in Nashville, TN who asks, “My ex-husband paid me alimony for most of 2005, but quit paying in September and filed a Petition for Reduction. The court ruled in 2006 that he pay me the 2005 alimony retroactively.
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He has appealed. If he prevails on appeal, I will have to return the alimony paid me from 2005 forward. How do I handle taxes on the alimony I’ve received in the meantime?”

Dear Mimi,

First of all, one court already ruled in your favor. Hopefully, all other courts will respect the decision of the first judge and you won’t have to deal with this.

But, that’s an interesting question.

Since you’re a cash-based taxpayer, can you take a reduction on your current year’s taxes when you pay back the money? I don’t know.

But, once the court makes a decision that the money you received in 2005 wasn’t alimony, that you have to pay it back, I think the easiest thing to do is to amend the 2005 tax return removing the alimony income. You’d include a copy of the court order.
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You should have no trouble – and you’d get a refund.
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I don’t know how long the appeals courts take to make such decisions. But…if the case drags out for years and you find yourself getting close to the three year deadline to amend the 2005 tax return, just remember to file a protective claim with IRS and your state before that 3-year statute ends.
https://www.asktaxmama.com/podcast/index.php?id=147

(Note: TN has no personal income tax, so no state claim need be filed.)

Good luck, I hope he loses his appeal!

And remember, you’ll find answers to questions about alimony and all kinds of tax issues, free.
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Where? Where else? At TaxMama.com

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