Can we extend alimony to pay for kids?

[legallyignorant]

What is the name of your state? IA
Ex (3 years ago) wants to pay alimony for 2-3 more years to cover some expenses of our kids which he'd likely pay but not get the write off. I m getting married in a couple months. Can we do this without an IRS problem? .

[Ohiogal]

Originally Posted by legallyignorant

What is the name of your state? IA
Ex (3 years ago) wants to pay alimony for 2-3 more years to cover some expenses of our kids which he'd likely pay but not get the write off. I m getting married in a couple months. Can we do this without an IRS problem? .

When does alimony end per your order? If at marriage then no he cannot do this. What he wants to do is pay child support so guess what -- he pays child support. NOT alimony.

[LdiJ]

Originally Posted by legallyignorant

What is the name of your state? IA
Ex (3 years ago) wants to pay alimony for 2-3 more years to cover some expenses of our kids which he'd likely pay but not get the write off. I m getting married in a couple months. Can we do this without an IRS problem? .

Is your new husband willing to have your joint taxable income increase, and have that tax liability so that your ex can get a write off for something that is really child support?...whether its court ordered child support or not? You HAVE been claiming the alimony as taxable income, have you not?

In any case, treating child support as alimony for the purpose of a tax deduction is something that is very much frowned upon by the IRS.

[Bali Hai]

Originally Posted by legallyignorant

What is the name of your state? IA
Ex (3 years ago) wants to pay alimony for 2-3 more years to cover some expenses of our kids which he'd likely pay but not get the write off.

If he is going to be ordered by the court to pay more child support, he has to do that and not call it alimony!!

I m getting married in a couple months. Can we do this without an IRS problem? .

Since he's giving money that he is not ordered to give, why doesn't he just give the amount he would have WITH the write off??

He can't voluntarily give you alimony and get a tax deduction for it. The alimony must be a written instrument in the form of a court order to be deductible.

[legallyignorant]

Alimony ends on my remarriage.
Yes I hv been counting it as income.
He is agreeing to 80K a year for 2 more years which is the same amount in the decree. So, we intend to extend it by agreement and with a court order. New husband sys thats fine.
I have a debilitating disease (known at the time of divorce) but own my own business (owned at time of divorce) with a partner. New husband makes abt 110K. I don't need $ but he obviously has a very high income, higher than mine and it also insures my kid goes to college. I guess what it boils down to is he can help me take care of kids and get a write off.

I didnt come up with this plan, he did. It seemed to me that the IRS would not allow people who are divorced somewhat amicably to extend alimony because he gets a write off altho I count it as income. I m told by my atty (family law not tax) a court will approve it....what I don't want is IRS probs.

[Ohiogal]

You will end up with IRS problems most likely. Because what you are doing is disguising child support as alimony. And he is agreeing to give you 80 k a YEAR? For the next two years? And he earns 110 k a year so this would leave him 30k a year? No one is that generous.

[wileybunch]

Originally Posted by Ohiogal

And he earns 110 k a year so this would leave him 30k a year?

That's new husband that makes that much.
If your ex is wanting to keep paying you $80K for next 2 years, I'LL marry him!
No wonder he wants the tax write off.

[Bali Hai]

Originally Posted by wileybunch

That's new husband that makes that much.
If your ex is wanting to keep paying you $80K for next 2 years, I'LL marry him!
No wonder he wants the tax write off.

What I don't understand is why doesn't he give her 80k minus what the deduct would be
(60k~) on his taxes and have it work out the same as if he claimed the deduction??

Unless he wants brownie points in the future for some reason.

[LdiJ]

Originally Posted by Bali Hai

What I don't understand is why doesn't he give her 80k minus what the deduct would be
(60k~) on his taxes and have it work out the same as if he claimed the deduction??

Unless he wants brownie points in the future for some reason.

Because that is logical....LOL.

All kidding aside, I can give you an example of why:

I suspect that dad is in the 35% marginal tax bracket based on the amount of the alimony. So his tax cost for 80k would be 28K.

Lets say that mom's new husband has a gross income of 60k, with 30k being taxable income after deductions and exemptions. Add 80k to that and their taxable income is 110k.
Tax for a married couple filing jointly on 110k of taxable income would be about 20k and the part attributable to the 80k would be about 15k.

Therefore, by shifting the income to mom, the feds get 13k less than if the income stays on dad's side. That's 13k that can be spent towards the kids expenses, therefore saving dad potentially 13k worth of out of pocket costs.

This is also way the IRS has a REAL problem with people who try to disguise child support as alimony.

I understand your logic Bali, if dad gives 52k to mom instead of the 80k, he is still out of pocket only 80k. However, if he is also planning on covering some major expenses for the kids that cost more than 52k, then he is also out of pocket potentially 13k more. That's why he wants to do it that way.

[Bali Hai]

Originally Posted by LdiJ

Because that is logical....LOL.

All kidding aside, I can give you an example of why:

I suspect that dad is in the 35% marginal tax bracket based on the amount of the alimony. So his tax cost for 80k would be 28K.

Lets say that mom's new husband has a gross income of 60k, with 30k being taxable income after deductions and exemptions. Add 80k to that and their taxable income is 110k.
Tax for a married couple filing jointly on 110k of taxable income would be about 20k and the part attributable to the 80k would be about 15k.

Therefore, by shifting the income to mom, the feds get 13k less than if the income stays on dad's side. That's 13k that can be spent towards the kids expenses, therefore saving dad potentially 13k worth of out of pocket costs.

This is also way the IRS has a REAL problem with people who try to disguise child support as alimony.

I understand your logic Bali, if dad gives 52k to mom instead of the 80k, he is still out of pocket only 80k. However, if he is also planning on covering some major expenses for the kids that cost more than 52k, then he is also out of pocket potentially 13k more. That's why he wants to do it that way.

Not only does the IRS have a REAL problem with this, EVERY OTHER tax payor should also have a real problem with this.

That $13k is coming out of MY pocket that the IRS lost to this scam. This is nothing more than another loop hole for high wage earners.

If OP and her ex go to court seeking an "alimony" extension, it should be denied by the judge for this very reaon!!

[wileybunch]

Originally Posted by Bali Hai

Not only does the IRS have a REAL problem with this, EVERY OTHER tax payor should also have a real problem with this.

That $13k is coming out of MY pocket that the IRS lost to this scam.

I get what you're saying, but then it sure would be nice if the gov't didn't think they had such a right to OUR money in the first place with all the fat/fluff/entitlement. Maybe there'd be less loophole exploitation if it weren't for the high tax burden and stupid complicated tax laws. </soapbox>

[tuffbrk]

You're my hero Wiley!! I agree with you 100%

[Bali Hai]

Originally Posted by wileybunch

I get what you're saying, but then it sure would be nice if the gov't didn't think they had such a right to OUR money in the first place with all the fat/fluff/entitlement. Maybe there'd be less loophole exploitation if it weren't for the high tax burden and stupid complicated tax laws. </soapbox>

If OP and her ex want to provide their children with more of life's benefits and have a mutual understanding that is what they will do, that is great.

However, don't scheme to use MY money to fund part of the benefits!!

[SMinNJ]

Originally Posted by Bali Hai

If OP and her ex want to provide their children with more of life's benefits and have a mutual understanding that is what they will do, that is great.

However, don't scheme to use MY money to fund part of the benefits!!

Not to get political and all that, but the government isn't an entity in and of itself... it derives its power from we the people, you know :-)... so my thinking is that if more of us voted the a**holes out of office who created the government which believes it has the right to our money, we might get something accomplished...

Off my soapbox now...

[TinkerBelleLuvr]

[url]http://www.irs.gov/faqs/faq-kw10.html[/url]

A payment to or for a spouse or former spouse under a divorce or separation instrument is alimony, if the spouses do not file a joint return with each other, if the following conditions are met:

(1) The payment must be made by cash, check, money order, etc.
(2) The instrument does not designate the payments as not includible in the gross income of the recipient spouse and not deductible by the payor spouse.
(3) The spouses are not members of the same household at the time the payments are made. Exception: If you are not legally separated under a decree of divorce or separate maintenance, a payment under a written separation agreement, support decree or court order may qualify as alimony even if you are members of the same household at the time of payment.
(4) There is no liability for payments after the death of the recipient spouse.
(5) The payment is not treated as child support.

[url]http://www.irs.gov/publications/p504/ar02.html#d0e2027[/url]

Specifically designated as child support. A payment will be treated as specifically designated as child support to the extent that the payment is reduced either:
On the happening of a contingency relating to your child, or
At a time that can be clearly associated with the contingency.
A payment may be treated as specifically designated as child support even if other separate payments are specifically designated as child support.

Contingency relating to your child. A contingency relates to your child if it depends on any event relating to that child. It does not matter whether the event is certain or likely to occur. Events relating to your child include the child's:
Becoming employed,

Dying,

Leaving the household,

Leaving school,

Marrying, or

Reaching a specified age or income level.


Clearly associated with a contingency. Payments that would otherwise qualify as alimony are presumed to be reduced at a time clearly associated with the happening of a contingency relating to your child only in the following situations.
The payments are to be reduced not more than 6 months before or after the date the child will reach 18, 21, or local age of majority.

The payments are to be reduced on two or more occasions that occur not more than 1 year before or after a different one of your children reaches a certain age from 18 to 24. This certain age must be the same for each child, but need not be a whole number of years.

In all other situations, reductions in payments are not treated as clearly associated with the happening of a contingency relating to your child.

Either you or the IRS can overcome the presumption in the two situations above. This is done by showing that the time at which the payments are to be reduced was determined independently of any contingencies relating to your children. For example, if you can show that the period of alimony payments is customary in the local jurisdiction, such as a period equal to one-half of the duration of the marriage, you can overcome the presumption and may be able to treat the amount as alimony.