What tax problems come from not reporting getting alimony?

Question

Mother has never reported getting alimony from my father for whatever reason. What kind of trouble can she get into, as I know alimony counts towards income? I wish to report this but wonder what trouble it may cause to her new husband.

Answer 1

Note that there are three types of payments your mother could have received: property settlement, alimony and child support. Only income from alimony is taxable.

Failure to properly report income on your tax return can constitute tax fraud, exposing your mother to criminal (in some cases jail) and civil penalties, as well as penalties and interest for underpayment of tax.

Her husband would not be liable for her omission provided alimony stopped prior to the year of their marriage. If he signed a return that omitted the alimony receipts, he too could be liable. Of course, if a married person owes fines and penalties, the other person in the marriage can be financially affected.

Answer 2

As stated before, child support is not taxable. A property settlement may or may not have tax implications. If your father owed your mom back child support, any money he gave her would go toward resolving the back child support first (even if he said "this is alimony" it would be considered back child support).

The worst case, she has to pay the taxes, interest & penalty. You didn't indicate how long she received it? The IRS would only know about alimony when/if it is reported as a deduction on the return of the individual who paid it (your father). I am not sure if this is a category the IRS vigorously monitors--especially given the child support versus alimony arguments. Depending on what state you live in would determine if/how the state would become aware of it as income.

Answer 3

Just remember that as long as mom has filed tax returns, the statute of limitations will expire after 6 years if the IRS can prove fraud. That's 6 years from the due date of the original return (including extensions), assuming the return was timely filed. If there is no fraud (and that's a facts and circumstances issue), the statute of limitations is 3 years. If mom has filed joint returns with new hubby and not reported the alimony, he'll be jointly liable for the tax liability. If not, it's her liability alone.

Answer 4

If her former husband is deducting it, then the IRS will eventually catch it. If he's not, then they probably won't.

In either case, if it's alimony by the definition the IRS uses, then she should have been reporting it all along as income.

Trouble she'd get into - most likely payment of back taxes, interest and penalties. Wouldn't likely cause trouble for her new husband, although if they file joint, any joint refund could get seized and he'd have to go through paperwork to get his part back.

Answer 5

First of all; until this is taken care of she and her new husband should file a "MARRIED, FILING SEPERATE" tax return so any refund of her husband's cannot be taken for her tax due. Then I would urge you to have her file amended (1040X) returns for the years in question and put her alimony received on said returns. Alimony is deductible to the payor and taxable to the recipient. She can play dumb taxpayer and should only have to pay interest on the tax due. Depending on her circumstances she may have no tax liability on it anyway.