By Bernie Becker - 05/15/14 06:57 PM EDT
The Internal Revenue Service does little to deal with billions of dollars in discrepancies between alimony payouts and tax deductions claimed for those payments, according to a new audit.
The inspector general added that the IRS examines just a small number of tax returns for those discrepancies, but beyond that has few procedures in place to address the issue.
“The number and size of the alimony reporting discrepancies on Federal tax returns is a concern,” Russell George, the tax administration inspector general, said in a statement. “The IRS should consider the use of less costly processes, including notifying taxpayers of apparent discrepancies, to expand its ability to address the issue."
In all, almost 568,000 taxpayers claimed alimony deductions of more than $10 billion in 2010. Roughly 47 percent of those returns had a discrepancy, the inspector general found.
People paying alimony receive a tax deduction, while those receiving payments must report that money as income.
A reporting discrepancy can happen when either taxpayers claim deductions when they didn’t pay alimony or when they fail to report alimony payments as income.