Illinois residents paying alimony are usually not entirely happy about it. Even if you can see the "logic" behind your need to pay alimony to your ex-spouse, the financial burden may not be easy for you to endure, so you'll want to take whatever tax breaks you can from the requirement.
Fortunately, those paying for alimony will not have to pay income tax on the money. You can deduct your alimony payments from your total net income and save a little bit of money on your taxes every year.
Your ex-spouse, the recipient of your alimony payments, is the one who will have to pay income taxes on the money. It is your ex's duty, therefore, to report his or her received alimony payments to the IRS as income.
Save your records to prevent a problem with the IRS
You can control the way you report your income to the IRS, but you can't control the way your ex-spouse reports his or her income to the IRS. If he or she fails to report your alimony payments as income, but you report them as deductions, there's a good chance it will trigger an IRS audit. Therefore, you want to have all the right documentation.
Here's what you should save relating to your alimony payments:
- A document listing all of your payments, their dates, their amounts, the check numbers, the address you sent the check to, a copy of the check that was cashed (if possible).
- A photocopy of every check that you used to pay your alimony with. In the memo part of the check, write down the month of the alimony payment and that it fulfills your alimony requirement;
- You should save all receipts for cash payments, and never make a cash payment without receiving a receipt that is signed by the recipient with the date to which the payment applies;
Don't throw away your records
Consider saving this documentation forever, as it is the safest way to prevent a problem with the IRS. At the very least, you should save the information for a period of three years going back from the date of your last IRS filing.
The better you do at keeping records, the less chance there will be of having a problem with the IRS, the law or your ex-spouse. If you do fall into legal trouble, you can use these records as evidence to defend yourself in court.