Hi, I am recently separated and my ex husband wants to be in a lower tax bracket, and has come up with a scheme for that. He has been giving me 1000.00 a month as spousal support and he wants to give me a 10999 at the end of the year so that it appears that he has paid me 12,000. For "services"( his words). Our marriage was a common law one, so he is not legally obligated to give me spousal support, and I was glad at first that he had agreed to the 1000. Per month. However, I am concerned that this would not benefit me( I have to pay tax on the support as income), and I'm wondering if this is even legal?

Please advise this unusual situation.

Many thanks, Adrienne

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Originally Posted by lvdesignz

Hi, I am recently separated and my ex husband wants to be in a lower tax bracket, and has come up with a scheme for that. He has been giving me 1000.00 a month as spousal support and he wants to give me a 10999 at the end of the year so that it appears that he has paid me 12,000. for "services"( his words). our marraige was a common law one, so he is not legally obligated to give me spousal support, and I was glad at first that he had agreed to the 1000. per month. However, I am concerned that this would not benefit me( I have to pay tax on the support as income), and I'm wondering if this is even legal?

Please advise this unusual situation.

Many thanks, Adrienne

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It is not legal!

Common law is a legal marriage in most states. If he was not ordered by the court in the divorce to pay you alimony, then all monies that you received is considered a gift. He cannot deduct it and you do not claim it as income. It's a gift. Nothing that he can do about it.

If he was ordered to pay alimony, then he can deduct it on line 32 (Alimony Paid)on Form 1040 along with your social security number, and you claim it on your tax return on line 11(Alimony Recieved) and you pay ordinary income tax on it.

IF he does issue you a 1099-MIsc Income, then you have to claim the income on your tax return. The easiest way is to claim it on a Schedule C (Self-Employed Income) Then deduct the amount under Other Expenses with the explanation:
"1099-Misc Income issued in error. No services or work was performed by taxpayer for issuer of 1099-Misc Income. Income received was a gift."

He will then have to prove to the IRS that you did indeed perform services for him. It will put the ball back in his court.

Do unto to others as you would have them do unto you.

Mobea:

That is a inventive method of dealing with improper Forms 1099-MISC.

Wish I had thought of it.

I am not sure that the "gift" of 1000 a month is not taxable anyway, since any income even without a W2 or 1099 is suppose to be reported anyway,

And I will note that actually common law marriage is not accepted in most states any longer, it used to be, but most states have long done away with those rules.

I had a conversation with the CPA that I work with tonight about this post because it was so unque. She was a little hesitant in agreeing with my original answer, although she said that it might be worth debating in an audit. The point was that she said that in case of an IRS audit, they would look at the "intent and benefit" of the money. They would consider the fact that his original intent was "spousal support" and that you acknowledge that you received and spent the money (You benefitted). She recommended that you put the income on line 21 on your 1040 as other income IF your ex claims it on his 1040 as spousal support. It still would not be considered "Non Employee Compensation" and you would not have to pay self employment tax on it, just ordinary income tax. If you do receive a 1099-Misc marked as Non Employee Compensation, then still list it on Schedule C with an explanation that is was issued in error and should have been marked as "Other Income" spousal support and then list the amount on line 21 on your F1040. Now that just saved you the fee for a consultation with a CPA on this one. LOL Especially 4 days before the deadline!

Thank you to all who answered my question. The situation is that this year, he is not giving me a 1099 for the 1000. A month that he is giving to me as ex spouse support. However, he was very upset when I approached him about this subject and that I do not wish to get a 1099 from him, since this money is not in exchange for any work or service. He said he wants to do the 1099 for 2007, however, because it helps to lower his tax bracket. I still don't feel comfortable with this situation and I told him so. Since we only had a commonlaw marriage, he was not court ordered to give me any support, and while I do appreciate the help while I get back on my feet, I don't want to get into any trouble with the IRS over this.

LvDesignZ:

Trust me, the IRS has bigger fish to fry. As long as you report the income as advised by Mobea, you should get very little static from the IRS.