The Effect of Alimony in Your Withholding Tax

In almost all of life’s changes, the IRS will make sure that it is part of it. Getting married, getting divorced, delivering a baby, transferring to a new job, buying a home and even purchasing an energy efficient car have tax implications. The effects of alimony on your withholding tax and the forms of IRS assistance on this matter will be discussed in this article.

Federal taxes can be settled in two different ways. One is through the estimated tax. Usually, people who work for themselves use this. The IRS said that, “estimated tax is used to pay not only income tax, but self-employment tax and alternative minimum tax as well.” Employees, on the other hand, mostly pay for their income taxes by withholding. In this case, your employer is authorized to withhold a certain amount from your check as income tax. From whatever form of income your tax is withheld, it is always reflected under your name.

The amount that is withheld from your pay is determined by two factors: how much you earn and the data reflected on your W-4. The latter includes details on whether you are withholding at the single rate or the lesser married rate, how many withholding allowances you can claim, and whether you want any additional income withheld.  For assistance in the computation of your withholdings, you may use the Withholding Calculator.

As previously mentioned, several instances can cause your withholdings to change, and alimony adjustment is among these.  How should you go about this method?  You can simply fill out a new W-4 and submit it to your employer to claim for adjustments in your withholding taxes.

Taxes are not reduced by alimony payments as these are considered as taxable income by the IRS. If you are a beneficiary of this, you might want to accomplish a new W-4 to update your income records. If you do this, you do not end up owing more taxes at the end of the year.

On the contrary, an expense for paying alimony is considered tax deductible. For the alimony to qualify as a tax deduction, it has to be given in cash, through a check or through money order. If you have worked out a deal with your ex-spouse and agreed to directly pay certain bills for her/him, this arrangement is not considered as alimony. Claiming for a tax reduction as a result of alimony can be done by, again, accomplishing a new W-4.

Change is inevitable. When they do happen, make sure to update your personal records so your taxes can be adjusted accordingly.

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Originally posted 2008-06-18 20:13:42. Republished by Blog Post Promoter

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