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Ex-spouses tell IRS different stories on alimony

Thursday - 5/15/2014, 7:20pm  ET

STEPHEN OHLEMACHER
Associated Press

WASHINGTON (AP) -- Somebody's not telling the Internal Revenue Service the truth about their alimony payments.

When people pay alimony to ex-spouses, they can deduct those payments from their income, lowering their tax bill. Their ex-spouses are then required to claim the alimony payments as income when they file their federal tax returns.

But nearly half the time, the numbers don't match.

More than 560,000 taxpayers reported paying a total of $10 billion in alimony in 2010, the IRS inspector general said in a report released Thursday. Their spouses and ex-spouses reported receiving less than $8 billion, for a $2.3 billion gap.

The report found discrepancies in 47 percent of the returns claiming the alimony deduction. In many cases, the spouse who supposedly received the alimony didn't report any. In other cases, they told the IRS they got less than their ex-spouses claimed to have paid.

The report doesn't render a judgment on which side is most responsible for the discrepancies -- the people paying alimony or the people receiving it.

Nevertheless, Inspector General J. Russell George says the IRS should do more to resolve the discrepancies. Apart from examining a small number of tax returns, the IRS generally has no procedures to address the compliance gap, the report said.

The IRS says it is improving computer filters to help catch the mismatches. But, the agency said, progress has been slowed because of budget cuts.

"Since 2010, the IRS budget has been reduced nearly $850 million," the IRS said in a statement. "At the same time, we have 10,000 fewer employees today than we did in 2010 even as our responsibilities have continued to expand."

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