If you are the paying spouse, you should retain all records of the alimony payments. Likewise if you are the recipient, you should retain all records of the payments you have received. Alimony is a sum of money paid by a spouse to the former spouse during separation or after the divorce. It is also referred to as spousal maintenance or spousal support. The court will not award alimony in all divorce cases. The court will consider the facts of each case and then decide whether one spouse is entitled to alimony. The present trend is that court award alimony mostly in cases of long term marriages where there is a significant income disparity between the spouses or where one spouse gave up or held back his or her career to look after the children.
Generally, the person paying the alimony can claim a tax deduction on the payments while the recipient must report the alimony payments on his or her tax returns. Alimony is taxable income. This is one reason why you should retain all records of alimony payments made or received. It’s not just the IRS that you may have to deal with. The recipient may claim that the payment was never made or the paying spouse can claim that the payment was made although it was not made. In such cases, you will need documentation to prove case.
Guidelines for Paying Spouse
If you are the paying spouse, you should keep the following:
• Records show when the payments were made including information such as the check number and the address to which the check was mailed. If your bank provides you with the cashed check, maintain it safely.
• Copies of the checks sent as alimony payments. If your check book does not have facility for carbon copies, you can take make a copy of the check using a copying machine. On the copy, note down the month for which the payment is being made.
• Receipt of alimony paid in cash. The receipt should clearly list the amount, the month for which the payment is being made and the date of payment/receipt.
You should retain these documents safely, at least for three years. In fact if you and your spouse have not parted on good terms or you believe your spouse will try and harass you in future, you should retain these documents permanently.
Guidelines for Recipient
If you are the recipient, you should keep the following:
• Records showing when the payment was received
• Details about the amount of payment
• If the payment is received by check or other instrument, retain the check number or other identifying number
• The account number mentioned on the check
• The bank name listed on the check or the place from where the money order was issued
• Copy of the check or money order
• If the payment was made in cash, copy of the receipt signed
You should retain these records at least for three years should the IRS decide to audit your returns. If you believe your spouse will try and harass you in future, you should retain these records permanently.