Tax And Alimony Agreements

There is an old parable stating that “Oral agreements are worth no more than the paper that they are printed on.” Our PA family lawyers know this, and for this reason everything is carefully documented in writing, generally with specific deadlines for completing things and with very detailed terms. Forbes magazine recently posted an article about a man who lost out by being too nice. In Alabama, a man voluntarily paid out spousal support of $1,000 per month to his wife of 29 years. When his wife developed medical problems and was unable to work, he voluntarily increased his support payments and began to pay $2,300 per month.

When tax season came around, the man attempted to deduct all of the money that he had paid over the course of the year as alimony payments. The IRS came after him, saying that although he paid out the money to his ex-wife, the payments were not eligible to be deducted for tax purposes as alimony because there was no written property settlement agreement or Court Order specifying that the money be paid as alimony.

The U.S. Tax Code only allows alimony to be deductible if it is within the amount specified by a written property settlement agreement. Anything exceeding what is required by the agreement cannot be deducted by the payor. Similarly, in Pennsylvania many spouses who have parted amicably have set up voluntary alimony arrangements. In these cases, it remains advisable to get the agreement into writing before any payment issue arise. Apart from the federal tax implications, an agreement to pay spousal support between parties can be memorialized and then adopted by the court in a court Order. This court Order is enforceable going into the future, and protects the rights of the payee spouse to enforce their alimony award.

Our PA family lawyers have years of experience negotiating and enforcing alimony awards. Even if you have an arrangement already, our Pittsburgh spousal support attorneys can turn into an Order that will be enforceable in court. Contact our team today to discuss your case!

Source: http://www.forbes.com/sites/peterjreilly/2013/04/19/tax-court-tells-man-he-is-a-mensch-but-alimony-deduction-denied/