Alimony, in the most basic sense, is payment from one ex-spouse to another following a divorce or separation. Alimony is not automatic; a judge orders it based upon the facts of the case. Usually, alimony is ordered when there is a great income disparity between ex-spouses. Alimony alters the taxable burden for both the sender and recipient of payments. This means that it is important to keep detailed records of those payments to ensure that you are not hit with an unexpected tax burden.
Documentation is only needed if you are audited by your state tax authority or the IRS. But, it is better to have it and not need it, than need it and not have it. If you are receiving alimony, then you should keep records that contain important details such as:
- The amount received.
- The date the payment was received.
- The account number from the check / electronic transfer.
- Identifying numbers for the payments that are usually check numbers or transfer numbers.
- A copy of the payment.
- A copy of any receipt you signed when you accepted the payment.
This information ensures that should you ever be audited you will be able to sufficiently establish your proper income levels. If you are the payer of the payments, then you should keep records including the following information:
- Copies of the check or electronic transfer of the payment and make sure you include a memo explaining the purpose of the payment.
- Signed receipts for any alimony payments made with cash.
- A complete ledger that includes details for each payment made such as dates, amounts, and the address the payment was sent to.
If you are the payer or receiver of alimony payments and have an issue regarding alimony payments, you may want to speak to a family law attorney. These records ensure that you are able to substantiate your income, but that is only half the challenge.