April is the herald of spring, baseball and taxes. While taxes are complex enough under ordinary circumstances, a divorce can make the tax process completely byzantine. Divorcing couples must consider not only what arrangements they will make for alimony and child support, but also how the Internal Revenue Service views those payments. The tax consequences of a divorce are significant, so ex-spouses will want to examine the effect of various provisions of the divorce agreement on their tax bills.

In particular, the IRS deems spousal support as taxable income to the recipient spouse, while the paying spouse receives a deduction for the amount paid. Child support is treated differently, however. Payments classified as child support are not considered taxable income to the recipient parent, nor can the paying parent claim child support as a deduction.

But in the area of taxes, a distinction is rarely that simple. Suppose one ex-spouse is under an order to pay monthly alimony and child support. One month, that spouse makes a payment for less than the combined monthly obligation. How is the payment classified for tax purposes? The Tax Code has a number of rules that determine when a payment is viewed as either alimony or child support.

In addition, the timing of a divorce can affect a couple’s filing status, which, as many people know, can be a significant factor in a person’s tax liability. Couples who finalize their divorce prior to the year’s end will not be able to take advantage of the beneficial joint filing status come tax time the following April. If practicable, waiting to finalize the divorce until after the New Year can be a solution.

A divorce will involve the resolution of a number of issues, and taxes can sometimes get lost in the shuffle. But it is always important to keep the tax consequences in mind.

Source: The Huffington Post, “When the Vows Break: Divorce and Taxes,” Steve Lake, April 13, 2012.