Audited based on Spousal Support

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Audited based on Spousal Support

Unread postby TJinCA » Mon Apr 17, 2017 3:24 pm

Just a heads up - I got audited on my 2015 tax return, challenging the deduction that I claimed for spousal support paid. This may have been random, or might have resulted from my ex reporting as income a slightly higher amount for the year than I deducted (so about a $50 mismatch between the two returns).

What the IRS wanted as proof of support was a court order and cancelled paper checks to my ex, with Spousal Support in the memo field. I'm paying through direct deposit from my employer to her account so I didn't have any cancelled checks, all I had was pay stubs that showed that money had been deposited to account xxxxx (which, from the IRS perspective, may or may not have been my ex's account so those payments may or may not have been spousal support).

I sent them the following, and they've accepted it and closed the audit:
1. Copy of court order showing the amount of spousal support ordered
2. Copy of all pay stubs for the year with the spousal support direct deposit amounts highlighted
3. An affidavit from my ex, signed and notarized, that showed the schedule of spousal support payments (matching the pay stubs) and acknowledging that these payments were deposited into her account as and for spousal support which she claimed as income on her tax return.

I think the notarized affidavit might have been overkill, for 2016 I just asked her to sign a "receipt" at the end of the year with the schedule of payments and acknowledging receipt of support. That should have the added advantage of making sure we both reported the same number. But hopefully I won't get tagged again this year.
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Re: Audited based on Spousal Support

Unread postby RockyCali » Mon Apr 17, 2017 7:58 pm

I assume the "inCA" part of your handle means "in California."

Do you also pay child support? I'm curious why your payments aren't going through your county's DCSS.
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Re: Audited based on Spousal Support

Unread postby TJinCA » Mon Apr 17, 2017 9:51 pm

Yes to California and no to child support.

I don't think support has to go through DCSS unless there's an issue and the receiver requests it.
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Re: Audited based on Spousal Support

Unread postby gamingdad » Mon Apr 17, 2017 9:54 pm

It doesn't "have" to go through DCSS, but I highly recommend getting it set up to go through.
It is a volatile "at any point in time someone gets butthurt" time bomb that could get sidestepped by running it through DCSS.
READ YOUR PAPERWORK BEFORE SIGNING! IF YOU HAVE QUESTIONS, ASK!
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Re: Audited based on Spousal Support

Unread postby TJinCA » Mon Apr 17, 2017 10:02 pm

I can see where that could be an issue for some but I don't think it will be for us, as long as I'm paying the court-ordered amount on the court-ordered schedule.

And I heard from a friend with personal experience that dealing with DCSS is a PITA at best. And worse if the ex gets butthurt and makes a claim - from what he said DCSS will treat any claim as valid and collect $$ until the payer proves it's not, and then it's difficult to get back anything they collected above what you owe. So I'd just as soon steer clear
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Re: Audited based on Spousal Support

Unread postby JimRockford » Mon Apr 17, 2017 10:25 pm

I know this forum strongly recommends using DCSS. However, I have found that when it comes to processing simple transactions and being accountable, I have little faith in the government bureaucracy.

I am not some anti government zealot, I have just seen them getting more incompetent over the years. Just last month I paid a car registration and they of course have no record of it. After being on hold for over an hour with Sacramento and having the cancelled check in hand, I must now go to a DMV and wait for two hours. Since the vehicle is over 10 years old, and it is under $100,I will probably just pay it twice as the remedy is just not worth it. The last thing I want to do is give them unfettered access to my bank account so when someone screws up, I end up in real financial trouble.
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Re: Audited based on Spousal Support

Unread postby grandetaco » Tue Apr 18, 2017 8:54 am

TJ,

Print out all the proof of electronic payments to spouse,
Then tally up the amounts and make sure it matches the amount you put in your taxes as a deduction.

Then look at the court order again match it to the order amount.

Then look at the dates the money was transferred for the ones in early Jan and late Dec.
Not sure if you have a problem here, some items for IRS is by date the payment was made, some items for IRS can be attributed to a Tax Year. I am not sure which is which for alimony, please do your part and read the rule and educate us.
you can call the IRS :mrgreen: , they will tell you.

Why audited: I think because your alimony deduction does not match nj's alimony income amount.
If you are correct, then provide copies of proof and create a worksheet for the IRS to explain why you are correct.
If you made a mistake just file an amended return
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Re: Audited based on Spousal Support

Unread postby TJinCA » Tue Apr 18, 2017 9:29 am

That's basically what I did in terms of documentation, and it worked for the IRS.

The discrepancy between our returns was because:

1. Ex thought she was getting paid on the 1st and 15th of each month, but my paydays are actually the 15th & last day of the month. So she counted the 12/31/14 payment as 2015 spousal support and counted the 12/31/15 payment as 2016 income (the audit was for tax year 2015). There was a change in amount of spousal support during the year because I got a pay cut, so the 12/31/14 payment was more than the 12/31/15 payment

2. For a while I was making two direct deposits to her--one to her separate account and one to a joint account we maintained for a while (I made small direct deposits to avoid fees on the account, we were both agreed that this was her money and counted toward spousal support). She forgot to add this into her total

The net of these two errors on her part was about a $50 difference in what she reported vs. what I reported. She reported more so that $50 basically got taxed twice--I didn't deduct it and she counted it as income.

It's possible that the audit was triggered by the mismatch between our returns. Also possible that it was triggered by the fact that the divorce isn't final so my status was Married Filing Separately yet I had a large deduction for SS. Also possible that it was randomly selected from returns with large spousal support deductions and I was just a "lucky winner."
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