Spousal Support & Taxes
January 22, 2014 5:32 PM Subscribe
My mother receives spousal support from a divorce, but it was as a separate contract between her and her ex-husband, not included in the divorce order. She's been having sobbing fits, unsure if she owes the government taxes this year.
Relevant information:
1. Received each month via transfer between bank accounts (within the same bank).
2. His income is 100% nontaxable (disabled military).
3. It was not included in the divorce order; it was a separate contract between them before the divorce was issued several months later.
If someone who knows the law better than we do could give some advice, it would be much appreciated. She refuses to speak to an accountant or tax consultant, afraid they would report her to the IRS and cause an audit.
Relevant information:
1. Received each month via transfer between bank accounts (within the same bank).
2. His income is 100% nontaxable (disabled military).
3. It was not included in the divorce order; it was a separate contract between them before the divorce was issued several months later.
If someone who knows the law better than we do could give some advice, it would be much appreciated. She refuses to speak to an accountant or tax consultant, afraid they would report her to the IRS and cause an audit.
It depends on how much it is. If is below a certain amount then she definitely wont.If it us mire than that maybe. If its not official spousal support it may be concidered a gift and gift taxes are a nightmare. Honestly she needs to see a tax consultant. If she's got money going into a bank account the IRS knows or will figure it out in the future.
posted by AlexiaSky at 5:44 PM on January 22, 2014
posted by AlexiaSky at 5:44 PM on January 22, 2014
If its not official spousal support it may be concidered a gift and gift taxes are a nightmare.
But gift taxes are generally paid by the donor not the recipient, so any "nightmare" wouldn't apply to the OP's mother. Still, the suggestion to seek tax advice from a professional is a good one.
posted by cecic at 5:54 PM on January 22, 2014
But gift taxes are generally paid by the donor not the recipient, so any "nightmare" wouldn't apply to the OP's mother. Still, the suggestion to seek tax advice from a professional is a good one.
posted by cecic at 5:54 PM on January 22, 2014
Best answer: A CPA is under no obligation to turn her in.
The payments are either alimony or property settlement. If its a regular stream of payments it's more likely alimony and is taxable income, while if it's one or two big payments that stop it's more likely a property settlement and is non-taxable.
if its alimony, husband should be deducting the payments and reporting her SSN.
Dummy up a quick estimate of the tax, see how much is due. You have to hit around 15k of income before anything is due, so the balance may not be that much.
posted by jpe at 6:04 PM on January 22, 2014 [1 favorite]
The payments are either alimony or property settlement. If its a regular stream of payments it's more likely alimony and is taxable income, while if it's one or two big payments that stop it's more likely a property settlement and is non-taxable.
if its alimony, husband should be deducting the payments and reporting her SSN.
Dummy up a quick estimate of the tax, see how much is due. You have to hit around 15k of income before anything is due, so the balance may not be that much.
posted by jpe at 6:04 PM on January 22, 2014 [1 favorite]
A CPA is under no obligation to turn her in.
A CPA who turned their clients over to the IRS would find themselves without clients right quickly, I'd think.
posted by mhoye at 6:06 PM on January 22, 2014 [6 favorites]
A CPA who turned their clients over to the IRS would find themselves without clients right quickly, I'd think.
posted by mhoye at 6:06 PM on January 22, 2014 [6 favorites]
You can't refuse to talk to a competent tax professional if you intend on getting the answers you need. If it helps, there are attorneys who specialize in tax stuff - show her this article on attorney-client privilege.
In any event, she has a little bit less than three months between now and tax day; she needs to work on the anxiety thing enough to be able to talk to someone who can actually help her well before the deadline.
posted by SMPA at 6:07 PM on January 22, 2014 [2 favorites]
In any event, she has a little bit less than three months between now and tax day; she needs to work on the anxiety thing enough to be able to talk to someone who can actually help her well before the deadline.
posted by SMPA at 6:07 PM on January 22, 2014 [2 favorites]
There are two paths here:
* Your mom owes no money, and a CPA can give her a lot of peace of mind.
(Variants of this include "Your mom will include no money after she does a lot of paperwork")
* Your mom owes some amount of money, and a CPA can give her awareness of exactly what her obligations are, and how to operate in the future.
A CPA is not going to turn her in, and there's really no long-term option here that lets her totally avoid a tax professional - especially if she wants to have peace of mind and stop having sobbing fits. The uncertainty doesn't go away just because you make it past April 14 without telling the IRS about the money.
posted by Tomorrowful at 6:26 PM on January 22, 2014
* Your mom owes no money, and a CPA can give her a lot of peace of mind.
(Variants of this include "Your mom will include no money after she does a lot of paperwork")
* Your mom owes some amount of money, and a CPA can give her awareness of exactly what her obligations are, and how to operate in the future.
A CPA is not going to turn her in, and there's really no long-term option here that lets her totally avoid a tax professional - especially if she wants to have peace of mind and stop having sobbing fits. The uncertainty doesn't go away just because you make it past April 14 without telling the IRS about the money.
posted by Tomorrowful at 6:26 PM on January 22, 2014
Best answer: You really need to talk with an attorney qualified in dissolution of marriage and the tax aspects of settlements/judgments. Depending the jurisdiction of your mother's dissolution of marriage the status of the payments she receives can vary greatly. I would suggest that a tax accountant/service is not really the best source for this information, although it may be a less expensive way to begin. If she was represented in the dissolution she should consult that attorney, who should have dealt with the pension/contract. This is not legal advice.
Whatever the result, now is the best time to deal with it for your mother's anxiety and to know what needs to be prepared for, if anything.
posted by uncaken at 6:39 PM on January 22, 2014
Whatever the result, now is the best time to deal with it for your mother's anxiety and to know what needs to be prepared for, if anything.
posted by uncaken at 6:39 PM on January 22, 2014
Sometimes one way to approach talking to someone about their anxiety is "what's the worst that could happen?" You start off with that question, and your mom says:
"I owe taxes to the government on that money!"
"Then what would happen, if you paid those taxes?"
"If I paid those taxes, I wouldn't have enough money to pay for X thing that I'd been planning to purchase!"
"What would you do, if you didn't have enough money to pay for X thing?"
"I would have to put it on a credit card, or borrow money from you to help pay for it, etc"
The point being that you try to figure out what the underlying issue is and see if you can find a solution to that, because if you know you have a solution for the worst possible outcome, moving forward won't seem so scary anymore.
Because "I might owe the government taxes!" is not the ultimate reason for crying fits - the implication of having to pay an unexpected bill on your budget in terms of what it means for other budget items is the issue, and knowing exactly what the other budget items are and what her means are to afford them would allow you to help her manage that issue, if she would share that with you.
posted by treehorn+bunny at 6:54 PM on January 22, 2014 [1 favorite]
"I owe taxes to the government on that money!"
"Then what would happen, if you paid those taxes?"
"If I paid those taxes, I wouldn't have enough money to pay for X thing that I'd been planning to purchase!"
"What would you do, if you didn't have enough money to pay for X thing?"
"I would have to put it on a credit card, or borrow money from you to help pay for it, etc"
The point being that you try to figure out what the underlying issue is and see if you can find a solution to that, because if you know you have a solution for the worst possible outcome, moving forward won't seem so scary anymore.
Because "I might owe the government taxes!" is not the ultimate reason for crying fits - the implication of having to pay an unexpected bill on your budget in terms of what it means for other budget items is the issue, and knowing exactly what the other budget items are and what her means are to afford them would allow you to help her manage that issue, if she would share that with you.
posted by treehorn+bunny at 6:54 PM on January 22, 2014 [1 favorite]
If she does end up owing money, the IRS will work with her to create an affordable payment plan. They are amazingly friendly and accommodating, in direct contrast to their reputation.
posted by Wordwoman at 6:55 PM on January 22, 2014 [2 favorites]
posted by Wordwoman at 6:55 PM on January 22, 2014 [2 favorites]
What your mother needs to realize is that her tax obligation does not go away if she buries her head in the sand. In other words, if she does owe taxes on this income, she will owe taxes whether she talks to an accountant or not. She really needs to speak with a competent accountant or tax attorney. Alternately, get the amounts from her and run it through a tax calculator like this one. If she owes anything, Wordwoman is correct - they will put together an affordable payment plan for her. A friend of mine owed only $500 one year, sent in $50 and her request for a payment plan with her return, and got a $50/month plan in the mail a few months later. Every time she called the IRS, they were extremely helpful and friendly.
posted by bedhead at 6:34 AM on January 23, 2014
posted by bedhead at 6:34 AM on January 23, 2014
If your mother really doesn't want to see an accountant or tax advisor, is it possible to ring the IRS with a general enquiry regarding alimony? Ask for publication numbers in particular.
posted by h00py at 7:08 AM on January 23, 2014
posted by h00py at 7:08 AM on January 23, 2014
Response by poster: We managed to talk to a professional today, and got a definite answer (see: Rose v. Rose in the supreme court) and peace of mind.
For those concerned about her well-being, thanks. Fact is that she's 70 years old, divorced after 42 years of marriage, and I'm technically her granddaughter -- she adopted me a few years ago. She's sharp as a tack and in relatively good physical health -- she's just stubborn, set in her ways, and bloody stressed out.
Thanks for the good answers, though. This is why I turn to the green.
posted by iarerach at 10:06 AM on January 23, 2014 [1 favorite]
For those concerned about her well-being, thanks. Fact is that she's 70 years old, divorced after 42 years of marriage, and I'm technically her granddaughter -- she adopted me a few years ago. She's sharp as a tack and in relatively good physical health -- she's just stubborn, set in her ways, and bloody stressed out.
Thanks for the good answers, though. This is why I turn to the green.
posted by iarerach at 10:06 AM on January 23, 2014 [1 favorite]
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