New Tax Rules for Alimony

Unlike in previous tax years, alimony paid under 2019 divorce agreements is not deductible to the payer. In addition, it is not included in the taxable income of the recipient.

For people who have already been paying or receiving alimony prior to 2019, the tax rules do not change. Alimony payments will continue to be deductible, and alimony received will continue to be reported as taxable income to the recipient. However, both parties can modify their divorce agreement in 2019 or later and specifically agree to have the new rules apply.

Don’t Be Victim to a ‘Ghost’ Tax Return Preparer

The Internal Revenue Service warns taxpayers to avoid unethical tax return preparers, known as ghost preparers.

By law, anyone who is paid to prepare or assist in preparing federal tax returns must have a valid 2019 Preparer Tax Identification Number (PTIN). Paid preparers must sign the tax return and include their PTIN. But ‘ghost’ preparers do not sign the return. Instead, they print the return and tell the taxpayer to sign and mail it to the IRS.

Unscrupulous ghost tax return preparers look to make a fast buck by promising a big refund or charging fees based on a percentage of the refund. These scammers hurt honest taxpayers who are simply trying to do the right thing and file a legitimate tax return.

Ghost tax return preparers may also: ● Require payment in cash only and not provide a receipt. ● Invent income to erroneously qualify their clients for tax credits or claim fake deductions to boost their refunds. ● Direct refunds into their own bank account rather than the taxpayer’s account.

Taxpayers should always review their tax return carefully before signing and ask questions if something is not clear. And for any direct deposit refund, taxpayers should make sure both the routing and bank account number on the completed tax return are correct.

Can You File as Head of Household?

The Head of Household filing status can lead to a lower taxable income and greater potential refund than the Single filing status. However, you must meet certain criteria. To file as Head of Household:

● you must have a qualifying child or dependent,

● you must have paid for more than half of the household expenses for the year, and

● you must be considered unmarried for the tax year (i.e. you are single or in some stage of a separation).

Married taxpayers are not eligible to claim Head of Household. Married Filing Jointly is usually more advantageous than filing Head of Household anyway.