Whatever you do and wherever you do it, it is nearly impossible to hide an earning or expenditure from the taxman. The IRS has their reach in every nook and corner of the country. So whether you are getting married or getting a divorce, have just bagged a new job or have welcomed home your bundle of joy the IRS will find out about it. It is also worthwhile to remember that everything from a big decisions like buying a home to small one like buying an energy efficient car will have an impact on the amount of money that owe the IRS.
In this article, we will talk about a life changing event that can have major implications on your tax dues, alimony A divorce can be the most painful or the most liberating experience of your life depending on the type of relationship you were in. However, in most cases alimony is a given and this payment will impact the amount of money that you pay in taxes.
There are two common ways to deduct taxes from your pay, you can either withhold the tax at source (like in case of employed individuals) or you could opt for estimated tax if you are self employed or you could choose to go for the alternative: minimum tax.
But in case of employees the taxes are withheld at source by the employer and forwarded to the IRS on a monthly basis. However, regardless of how you choose to pay your taxes, any winnings, bonuses, losses and commissions will reflect under your name. If you are a salaried person, the amount of money withheld for tax payment from your pay will depend on two factors: the amount of money that you make and the information provided in your W-4 form.
All information related to your finances such as the number of withholding allowances etc are mentioned in the W-4 form. If you are not sure about your withholding tax amount, simply use the IRS withholding calculator available online. If you are paying alimony after a divorce, you can claim for alimony adjustment. Simply forward a new W-4 form to your employer which mentions the alimony adjustment.
If you are the alimony payer you can include this expense in your tax deductions. However, for the alimony to be considered for a tax deduction it should be paid in cash or through a check or money order. If you have an arrangement with your spouse under which you make direct payments of certain bills; this will not qualify for a tax deduction. Once again remember to mention this expenditure in your W-4 form.
If you are a recipient of alimony payment, you need to know that this type of income is taxable and hence you cannot use this type of income for tax reduction purposes. However, it is best to be aware of how much you owe the IRS so that you don’t find yourself in a quandary where you need to a make a bulk payment to the IRS to cover for your lapses.
Changes are an integral part of human life; however it is imperative to update your personal records in case of change as small as it may be in order to pay your taxes accurately. If you have any confusion about the amount of money that you owe the IRS or about a specific deduction regulation get in touch with a a qualified accountant.
Alternatively, if you find yourself in a situation where you own the IRS an exorbitant amount of money, get in touch with a Dallas tax attorney to sort the situation out at the earliest. Remember tax issues are better sorted out sooner than later. Unlike banks, who can simply report your indiscretions to the credit reporting bureaus; the IRS can actually get you arrested and try you for a criminal offense. So tread carefully and get all the information that you can about the various laws and regulations that apply to your specific scenario.