Alimony or not?

[Nashville]

TAG!! You're it!!!

Might be interesting to think through just who might have cause of action against them, and [TAG!!] them for recovery.

I think Dave's client should pay on the extra money as alimony, and count her blessings. Received an extra $9600 like manna from heaven and now might end up paying a couple thousand back?

Has no cause of action even against the court. Even if it were practical to sue a state agency (good luck on that one) you would have to prove damages. The only "damage" that can be proved is she ended up with $9600 minus taxes instead of just $9600.

Ex husband? He was the only party "harmed" and apparently he doesn't even know it. Can he recover from the local court clerk? Probably could, but decisions don't go against the state very often. They might award him the money "contingent upon their ability" to get the money back from the ex-wife. I'll bet he could really get excited about his chances for that...

[JohnH]

One never knows - the ex may have felt that paying the extra $9,600 was worth it.

[erchess]

I look forward to hearing how this comes out

My first thought was that it should not be taxable but I keep coming back to the fact that income is taxable unless it's specifically exempted. I just can't think what category of exempt income it would fall under. Given the source I think I'd have reported it as alimony but I think putting the overage on L 21 would also fly at the end of the day but might get a computer generated letter. Given that it didn't get reported timely there is TPI now but the T was for a while extra money and the PI represents a pretty reasonable fee for the use of money.

[Roberts]

Thanks for all the input. My position is pretty much the same as Roberts. I'll post the outcome after it works through appeals.

I'm guessing your client's ex claimed the money was alimony on his 1040 and the IRS is just going after her because of the pattern of payments. Let us know.

[Burke]

I'd love to hear the final pronouncement because as a Certified Divorce Financial Analyst, this is EXACTLY how we are taught. The ex-spouse is prohibited from labeling this money alimony because it doesn't meet the parameters of the divorce decree so the receiving ex-spouse can't be forced to label it as such.

Do you have a cite for this position? Perhaps in course materials you had when qualifying for this designation. Seems like it would have been addressed somewhere prior to this, if not a ruling, then a tax court case? I tried researching this and there are cases all over the place where this exact scenario occurred, some where the overpayments were subsequently applied to later underpayments to adjust the amount, some where the payor deducted the actual amts paid on his tax return so it was prohibited from being designated as a gift, etc. It seems it depends on the state as well as to how this is handled. But could not find any TC decisions.