What should I do about my taxes witheld from alimony?

Question

My alimony agreement says I can withold the taxes from the payments I make. This year, however, I do not owe any quarterly taxes. should i give it to the ex or keep the money in case i owe taxes later? My accountant does not know what to do and my lawysays talk to my accountant.

I am a widow paying my deceased husbands alimony arrears. Yes, it is a legal nightmare!
the ex sued his estate and that means me.

The reason is because i make the payments from my IRA and the withdrawls are taxable.
Thus the taxes are owed by me. The ex will not provide her sociual security # to me.

HE owed her over 1 million and settled for monthly payments of $1,000. per month for her lifetime. thank god she is 79 and smokes!

agreement states that she agrees to reimburse me (the payer) for her share of the tax liability.
the tax payment isd to be witheld from her monthly payment. I suspect this is because her lawyer is taking the money.

fortuantely, the agreement states that the payments stop at her death and any interest she had in the estate "reverts back to me."

Answer 1

The recipient must provide a SS# or they are subject to an IRS penalty on their return. If this situation has included at least one year's return in which you did not have the SS# for the recipient you should call the IRS and report her. If the IRS penalty pushes her beyond the point of the "until death" clause, you may still owe "her estate" for any arrears that have accumulated over the years. That means that you will be paying her kids or other benefactors of her estate until the arrears due her from the estate is covered.

I would ask your attorney and CPA about the idea of paying the entire debt from the estate. There could be a good reason but it is not apparent from the information provided.

Answer 2

Your question is a little confusing. Alimony is of course deductible for the payer as an adjustment to gross income, and taxable to the recipient. Normally the payer just pays the total amount, and it is the responsibility of the recipient to pay the quarterly taxes on it if they need to, but I suppose that they could be forwarded to the IRS directly from the payer although I've never heard of that being done.

If you are the one paying the alimony, and the agreement allows for taxes to be withheld by you from what you pay your ex, you would be sending the withheld amount to the IRS for your ex's account, not for yours, so it wouldn't have anything to do with whether YOU owed quarterly payments. If this is what you meant, I sure hope you haven't been doing this, and sending the money in to the IRS as YOUR quarterly payments - if so, you are now in arrears on your alimony by whatever amount you've done this with. Anything withheld would be withholding for the recipient of the alimony, not for the payer.

If you are the recipient, you should be getting the money, and if you are going to owe at tax time, sending quarterly payments to the IRS - you would NOT send the money to your ex.

Edit: OK, now with your added info, it makes sense.

You are still paying taxes on the withdrawals, whether you owe quarterly payments or not. So if she's supposed to essentially pay the tax on the part of the withdrawal that she'd get, that amount would stilll be withheld by you from the payments to her - you are still paying the taxes sometime, unless your total income is so low that you don't owe any in which case her share of zero would be zero so she'd get the full $1000 per month.

Answer 3

Is there a reason that the estate didn't just pay off the (actuarial) remaining balance? This would have reduced the size of the estate. And since it was the estate that owed the alimony, *you* don't get an income deduction for it. It's a moot point that you don't have the SSN for the ex-spouse.

So, the gist is that when you take money of the IRA to come up with the alimony money, you are increasing YOUR income for the year. If if you are in the 15% tax bracket and need to make a $10,000 alimony payment, you will need to take out $11,765. $10,000 for her and $1,765 for YOUR taxes. (You do NOT take out $10,000 and short her $1500.)

Answer 4

I do not understand why you need withhold tax from alimony!? Alimony payments are usually deductible by the payer and includible as income by the recipient. The reciepent of the alimony is the one must pay tax!

If nobody helps you, even the accountant and lawyer who should be able to tell you, at least something, you must do your own research to protect yourself. You will be amased that how much you can learn by just clicking several buttons on your keyboard, instead of paying for the above "lousy professionals". Educate yourself, so you can do what is the right and good for you!

"Liability for payments after death of recipient spouse. If any part of payments you make must continue to be made for any period after your spouse's death, that part of your payments is not alimony whether made before or after the death. If all of the payments would continue, then none of the payments made before or after the death are alimony.

The divorce or separation instrument does not have to expressly state that the payments cease upon the death of your spouse if, for example, the liability for continued payments would end under state law.

Example.

You must pay your former spouse $10,000 in cash each year for 10 years. Your divorce decree states that the payments will end upon your former spouse's death. You must also pay your former spouse or your former spouse's estate $20,000 in cash each year for 10 years. The death of your spouse would not terminate these payments under state law.

The $10,000 annual payments may qualify as alimony. The $20,000 annual payments that do not end upon your former spouse's death are not alimony. "

You should see your local H&R Block tax professionals, before they get too busy with incoming tax season or call their toll free number: 1-888-OUR-HRBB (888-687-4722)


Check out the following sites:

For IRS site, at first you will see empty page, then do not leave, scroll down till you see the info, it is a kind of in the middle of the page!
http://www.irs.gov/publications/p504/ar02.html#d0e2047

http://www.hrblock.com/taxes/tax_tips/tax_planning/divorce.html?pgnavp=tp&pgnavc=tp_lc&pgnava=tp_lc_4&srchterm=alimony&srchnum=3

Answer 5

I have never heard of withholding taxes from alimony. It really doesn't matter. Your ex is obligated to pay you whatever alimony is ordered. He can deduct it from his taxable income and you are obligated to pay income tax on it. Take everything you are entitled to. If you pre-pay too much income tax you will get a refund.