Welcome back. We are currently discussing the often confusing tax consequences that go along with divorce in California and elsewhere.

As we mentioned in the last post, child support payments have no tax consequences. They are always considered non-deductible to the paying parent and non-taxable to the receiving parent. Same is true with property settlements following a divorce.

However, alimony payments do have tax consequences, both for the paying and the receiving spouses. Forbes recently published an article that explains seven key things people need to know about how alimony will affect their taxes. Here are the final three points.

5. The paying spouse must include the social security number of the receiving spouse on Form 1040, line 31b when filing taxes. Failing to do so could result in a $50 fine.

6. Remember that payments are only considered alimony for tax purposes if they are made AFTER a written separation agreement or a divorce decree issued by the court. Payments made before they are ordered do not count.

7. If these tax consequences are unappealing to you, you can work with your attorneys to find more attractive alternatives. For example, an upfront lump sum payment in lieu of alimony could be made, which could forgo all tax consequences.

These are helpful tips from Forbes. As you can see, divorce can get extremely complicated, especially when it comes to alimony and taxes.

In order to reach the most beneficial outcome, many people who have gone through divorce in California and elsewhere find the assistance of an experienced family law attorney to be imperative.

Source: Forbes, "Seven Key Things Women Need to Know About the Tax Implications of Alimony Payments," Jeff Landers, Nov. 30, 2011