The IRS is in the middle of one of the biggest shakeups it has had in decades. They are overhauling their technology, reevaluating how they are handling tax audits, and on the verge of a new hiring wave to make up for the hiring blackout they have been under for the past seven years. One of the major changes the IRS is planning to make comes in the form of an additional question in Schedule 1 of the 1040 form for 2019 tax returns. The other main change is that if the divorce took place after December 31st, 2018, alimony recipients no longer need to list alimony payments as potentially taxable income. Tax laws are complicated, intricate, and ever-changing. Stay ahead of any potential problems and get in touch with Inside Out Tax Resolution Services.
The addition to Schedule 1 of the 1040 form is a simple question: “When did you get divorced?” This question is important because there was a major change to the divorce tax laws in 2019. If the divorce occurred before December 31st, 2018 and after the 2017 tax overhaul, taxpayers who pay alimony can continue to claim a deduction for payments made and those who receive alimony still need to report the payments as taxable income. Under the new laws, those who receive alimony payments will no longer have to claim those payments as taxable income. Those making alimony payments will also have changes on their taxes, as the deductions for alimony payments are in flux.
The IRS initially accounted for these dates by creating a filter in their backend that searched to see if alimony payments had been made prior to the 2017 shakeup and before the 2019 tax code change. These filters were in testing phases as these changes were set to be most impactful in 2020, but the addition of the date question on Schedule 1 of the 1040 form will simplify the overall process for the IRS. The IRS routinely uses these filters to establish potential tax returns to audit as well as to search for fraud cases.
What This Means
If you have undergone a divorce in 2018 or 2019, it is important to know which side of this dateline your divorce falls on. This information is especially important for any and all alimony payments you have made or have received. Tax laws have a way of changing and running through many iterations, so it’s important to stay up to date on divorce and alimony tax laws if you’ve gone through a divorce recently. The change to Schedule 1 of the 1040 form will be implemented for next year’s tax returns but may change again depending on how the laws evolve and change for alimony payments. Luckily, you don’t have to be a tax expert to understand taxes. No matter your financial or tax-related situation, contact Billy at Inside Out Tax Resolution Services to help solve your tax problems!