Question

How should Alimony be reported on the tax returns of the payor and recipient?

Answer 1

Alimony is reported differently for payors and recipients depending on when the divorce or separation agreement was executed. For agreements after December 31, 2018, alimony is no longer deductible for the payor and not taxable for the recipient. For earlier agreements, it is reported differently with forms and lines specified by the IRS.

Step-by-step explanation:

Alimony must be reported on the tax returns of both the payor and the recipient, but the specifics can depend on the date the divorce or separation agreement was finalized due to changes in the law with the Tax Cuts and Jobs Act of 2017. For divorce or separation agreements executed after December 31, 2018, alimony payments are no longer deductible for the payor, and the recipient does not include the alimony received as income. However, for agreements executed before that date, the payor can deduct alimony payments from their income on Form 1040, and the recipient should report the alimony received as income.

It's important to note that if you have alimony to report and your total deductions exceed $1,500, you cannot use Form 1040EZ. Instead, you would use Form 1040 or 1040-SR. Moreover, line 2b on Form 1040 is where a recipient would report alimony received, while for the payor, it would be included in the 'Adjusted Gross Income' computations, providing documentation is in place to substantiate the alimony payments.

Remember, your individual situation may require additional considerations, and consulting with a tax professional or CPA is always advised to ensure you're following current tax laws and regulations. Lastly, someone can claim you or your spouse if a joint return is filed, which can also impact how you report alimony and other tax obligations or refunds.

Answer 2

Alimony must be reported on tax returns differently by the payor and recipient depending on when the divorce or separation agreement was executed. For agreements after 2018, the payor cannot deduct alimony and the recipient does not report it as income, while pre-2019 agreements allow deductions for the payor and taxable income for the recipient. Reporting is done on Form 1040, and the correct lines must be used for each party.

Step-by-step explanation:

When reporting alimony on tax returns, the payor and recipient must handle it differently. The tax treatment of alimony payments changed significantly with the Tax Cuts and Jobs Act of 2017. For divorce or separation agreements executed after December 31, 2018, the payor cannot deduct alimony payments, and the recipient does not include them as taxable income.

However, for agreements executed before that date, the payor can deduct the alimony from their income, and it is taxable to the recipient. If alimony is reported by the recipient, it is included in Line 2a of Form 1040. The payor must provide the recipient's Social Security Number on their tax return if they're deducting the payments.

Additionally, for those using Form 1040 with a total income over $1,500, they must be aware that Form 1040EZ cannot be used, as it is indicated by the reference 'If the total is over $1,500, you cannot use Form 10402'. The payor's alimony payments would typically be listed on Schedule 1 (Form 1040), specifically on Line 31a. For the recipient, alimony received would be recorded on Form 1040, Line 2a, as previously mentioned. This amount would then be included in adjusted gross income calculations on your return. It is important for both parties to accurately report alimony for compliance with the Internal Revenue Service (IRS) rules.