Alimony Blues

You get them when you have to pay alimony.  But it seems Uncle Sam has become really down in the dumps in recent years about alimony recipients.  That’s because, as recently noted in a report by the Treasury Inspector General for Tax Administration (TIGTA), those who pay are very good at claiming the appropriate tax deductions, but those who receive seem to have lapses of memory, in many cases, when it comes to reporting the income side of the deal.

In tax year 2010, f’rinstance, a total of over 567,000 taxpayers claimed alimony deductions totaling more than $10 billion.  Unfortunately, though, about 266,000 of the recipients (about 47%) just simply “forgot,” we guess, to report the receipt of the alimony income, as the law requires.  According to TIGTA, that means more than $2.3 billion in deductions were claimed without the reporting of corresponding income – costing Obama a whole bunch of tax dough!

The sad fact is, per TIGTA, that IRS generally has “no processes or procedures to address this substantial compliance gap.”

Nice.

And to add insult to injury, IRS processes also do not ensure that individuals provide a valid recipient Taxpayer Identification Number (TIN) when claiming an alimony deduction, as is required!  Further, IRS did not assess penalties (in 2010) totaling about $325,000 on individuals who did not provide a valid recipient TIN – also, as is required!

According to TIGTA J. Russell George, “The number and size of the alimony reporting discrepancies on Federal tax returns is a concern.”

Really?

Nonetheless, the bucks (mostly from we honest folk) just keep rolling in – indeed at a “record pace,” according to CNSNews.com.  For the first seven months of the current fiscal year, more than $1.7 trillion piled up in the IRS’ coffers.  That’s the good news.  The bad news, however, is that the government still ran a deficit of about $306 billion for that seven month period!

The White House Office of Management and Budget estimates that for all of fiscal 2014, the government will have managed to overspend its revenue stream by about $650 billion – once again!

And finally, this week, we hear from the Government Accountability Office (GAO) that while IRS keeps itself so busy auditing Tea Party-oriented conservative groups, they seem to have not found it necessary, in recent times, to audit even one “high-value electing large partnership” with more than $100 million in assets!

“No partnerships that filed a Form 1065-B from tax years 2002 to 2011 had their tax return audited and closed by IRS from fiscal years 2007 to 2013,” per a footnote contained within the GAO report.

And they’re worried about a few bucks of unreported alimony income!

CONSULT YOUR TAX ADVISOR –  This article contains general information about various tax matters.  You should consult your CPA regarding the implications to your own particular situation.

Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno.  He can be reached at 831-7288, welcomes comments at jquinn@ashleyquinncpas.com, and invites readers to consider his other commentary at http://blog.nolo.com/taxes.

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