TIGTA: 47% of Alimony Deductions Claimed Don't Match Alimony Income Reported to IRS

The Treasury Inspector General for Tax Administration yesterday Significant Discrepancies Exist Between Alimony Deductions Claimed by Payers and Income Reported by Recipients (2014-40-022):

Individuals who pay alimony can deduct the amount paid from income on their tax return to reduce the amount of tax an individual must pay. Conversely, individuals who receive alimony must claim the amount received as income on their tax return. TIGTA initiated this audit to evaluate the alimony reporting gap and to assess controls the IRS has in place to promote reporting compliance.

Processes have not been developed to address the majority of discrepancies between alimony deductions claimed and income reported. TIGTA’s analysis of the 567,887 Tax Year 2010 returns with an alimony deduction claim identified 266,190 (47 percent) tax returns in which it appears that individuals claimed alimony deductions for which income was not reported on a corresponding recipient’s tax return or the amount of alimony income reported did not agree with the amount of the deduction taken. There is a discrepancy of more than $2.3 billion in deductions claimed without corresponding income reported.

• Accounting Today, Discrepancy Seen in Nearly Half of Alimony Deductions Reported to IRS
• Forbes, Alimony Tax Gap Is $1.7 Billion
• U.S. News & World Report, Investigator: Ex-Spouses Often Tell IRS Different Stories About How Much Alimony Is Being Paid
• USA Today, Report: $2.3B Gap From Alimony Tax Deductions
• Washington Times, Divorcees Cheat IRS Out of Millions Through Alimony Payments