The legally valid divorce or separation agreement is an important tool for divorcing couples. The terms negotiated in such an agreement can have lasting impacts for individuals. The tax implications of one alimony agreement are discussed in a recent news story which may provide some helpful information for persons considering divorce in the state of Wyoming.
The story mentions a couple who reached a divorce agreement. Prior to the divorce, the man had received a bonus that, after taxes, was in the amount of $155,000. He agreed to pay nearly half the bonus to his wife before the divorce was finalized. After the marriage was terminated, an alimony agreement was created that included a monthly payment amount, with a provision that included a percentage to be given to the ex-wife for any income that exceeded $12,500. The agreement did not mention the bonus that had already been given to the woman.
The man later tried to claim the bonus payment as part of an alimony deduction. It was flagged by the IRS as not allowed. Since it was not part of any formal agreement, and was given prior to the divorce, the man was not able to claim the alimony deduction for the large bonus.
Reaching a legal separation or divorce agreement is important for the peace of mind of both parties. It also settles important tax questions for the IRS. Many persons who are facing divorce choose their own family law attorney for this reason. In the state of Wyoming, a family law attorney can help an individual take all angles into consideration when it comes to forming an divorce agreement with alimony provisions.
Source: accountingweb.com, “Zero Alimony Deduction for a Split Bonus, Tax Court Says“, Ken Berry, June 19, 2017