Tax Law
In Sept 2005 I received $30,000 as part of a divorce settlement. My ex used a credit card to pay me the money. The credit card money told the IRS that this was a settlement paid to me. I did not claim this as income but now the IRS wants to fine me and have me pay taxes on this sum on my 2006 taxes. The credit card company never informed me they notified the IRS.
1 Answer from Attorneys
Re: Tax Law
A divorce settlement should not be taxable income, but depending on how it was reported to the IRS, it may be categorized as such.
First of all, when correspondence is received from the IRS someone (either the taxpayer, the accountant, or an attorney) will need to respond to the correspondence by the due date. Ignoring the letter or failing to respond by the due date will lead to further collection activity.
From your hypothetical, a copy of the divorce settlement agreement and court order would seem to be good evidence supporting your claim that the income should not be taxable.
Good luck to you. If you require assistance, please let me know.
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