 Income tax 2022-2023. Alimony received software example problem. Let's do some wealth preservation with some tax preparation. Support accounting instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course. Each course then organized in a logical, reasonable fashion, making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. Here we are in our example form 1040 using LASERT tax software to populate it. You don't need tax software to follow along, but it's a great tool to run scenarios with. You can also get access to the form 1040 related schedules and forms at the IRS website irs.gov irs.gov. Our starting point like normal is the single filer Mr. Anderson no dependence 100,000 on the W2 wages 12,950 on the standard deduction 87,050 taxable income mirroring that on our Excel worksheet 100,000 12,950 87,050 taxable income therefore page two tax calculated at 14774 15,000 withholding skits us down to the 226 we have that mirrored over here as well. But our major focus is really on the taxable income calculation as we consider a situation where alimony has been received. So if alimony is recede with a receipt recipient end of the alimony payments, then the question is, is it something that has to be included in income or is it exempt from income? The law changed a little bit while back and this is one of those laws were oftentimes the situation is the case. Even if you think the tax law is a good change, oftentimes you have to kind of draw a line and say, well, before this point in time, we're going to keep it the way it was because people made their decisions based on the last rule. And so then we're going to make the decision different on this timeframe going forward. And that's kind of what happened with the alimony. So let's see if I hit the plus button here, we're going to go down to the schedule one. And our question is, do we have to include the alimony in income on the schedule one, which would go in line two A and then to B has the date of the original divorce or separation agreement. So remember that the general rule used to be before the change was made was there's this big difference between in a divorce or separation. I'm not really divorced. I'm really separate the categorization of child support versus alimony, which wasn't always really defined in the actual separation agreement. So then you had to kind of piece it out and say, which is which of these payments are child support and alimony because they have different tax consequences. If it was child support, then the person paying wasn't able to get a deduction. The person receiving didn't have to include it in income. So that was a benefit to the person receiving the money. In that case, if it was categorized as alimony, then the person paying did get to have a deduction. They would typically report then the social security number of the recipient, just like the IRS forces basically all recipients, you know, anytime they can to do just like an employee or employee situation where they force the employee or to tell them the money that you gave them, right? Same kind of scenario there. And then the recipient had to record it as income. So similar kind of thing. The payer gets a benefit. The recipient then has to record the income. So in that case, the alimony was beneficial for the payer. Now, you might think that the law is benefiting either the payer or the payee, but in general, I would think that in a perfect world, when you're doing the separation agreement, if everything, if everybody knew the tax consequences and could take those more complex scenarios into consideration, they would then construct their separation agreement to be fair according to the tax law, which is more difficult when it was a more complex tax law. So they basically just kind of remove that out and said, I don't care if it's alimony or child support, we're not going to put the deduction or the income related to the payments from one spouse to the other in a separation kind of situation. So that usually makes it a little bit easier. Now, that would be a problem if you had created the divorce agreement before that happened, because you took the tax consequences into consideration when you came up to the agreement, but agreements made after that point in time, you would think would be adjusted to take into tax consequences on that scenario, and everybody would have a more better understanding of what's going on. So that's my interpretation. So that would mean that if someone had alimony, the general question is going to be just from a practical standpoint, when did this happen? Is it was a negotiation agreement that happened before the cutoff, which I believe is December 30, 2018? If it is, then you might still have to record it as income and the person that's paying might be able to record the deduction. If there was an adjustment to the agreement or the agreement was made after that cutoff date, then you're not going to have the alimony included in income. So that's the general idea. So you get the general idea. When you have questions that come up, that's generally how it arises. Now, obviously, if you're looking at alimony, then from a practical standpoint, if they reported alimony last year, you would expect it to happen. You expect another year of alimony because that means the agreement was made if last year's return was done properly before the cutoff date. But if there was a new situation and it wasn't on the last year's tax return, you would think, well, no, you probably wouldn't include it because it's not going to be a taxable event due to the fact that the agreement happened after the cutoff date. And that's the discussion that might come up with clients and whatnot with that kind of scenario. So let's imagine it was like prior to the cutoff date here. I'm going to say alimony. Let's right-click and jump on over and say we had alimony. So alimony received, let's say it was whatever 15,000 date. I'm going to make it before December 31st, 2018. So I'll make it 06, 06, 17, and non-tax. And so I'll keep it there. Alimony received, boom. And if we jump back over there, we have it. The alimony is now being included in income and they have the date of the divorce or separation. So if it's a complex situation, you can look at the instructions there. So now obviously that's going to be summed up at the bottom of the schedule. That's going to pull into the form 1040 on the income line. So we've got wages and then we've got this 15,000 other income here to bring us up to the adjusted gross income of the 115,000. I can mirror that on our worksheet. I'm going to say this is something that came from the schedule one. So let's do I have a schedule one here? I had schedule, I don't think I do. Let's add a schedule one. I'm going to say put it next to the income. I'm going to say it's a income schedule one. And then I'll format this thing. I'm going to select the whole worksheet right click. I'm going to do this fairly quickly because it's not an Excel course, but I'm just showing you how you can construct your worksheet if you want to put one together as you go, or possibly I could provide you with this one if you want to use this one. And I'll get rid of that. I'm going to scroll in a bit and this is going to be schedule one income. And let's make the whole thing emboldened. And let's make this like black and white, black and white for the header. And then this is going to be alimony. Alimony. I don't have no idea how to spell alimony. Alimony. It's the alamo. The alamony. Okay. Alamony. Alimony. Alimony. Is that what it said? And then I'll leave a couple spaces here for it because, you know, maybe you have a situation where there's, they're getting multiple alimonies. They're an alimony professional alimony professional here that could that's collecting multiple alimonies. I'll say this is alimony one. And let's put this on the, we're going to say, how much did I say 15,000? Let's total this up. Total alimony. Oh my goodness. Alimony. And let's see if I spelled, let's do a spell check on that. Spell checkie. Yeah, you spelled all of them wrong. All of them. Okay. And then we'll sum it up. Sum it up. Idiot. Whatever. Here we go. Let's total it up. This is the total schedule one income. Let's total it up. Boom. Sum it up on the outside. Then we're going to pull this over to page one. So it's not included in line one. I'm going to pull it into line one. Now I'm going to double click, go to the end of it. I'm going to say plus the stuff from the schedule one income. Boom. 15,000. Bam. All right, there it is. So now we've got the 12,950 brings us down to the taxable income. 102 50. Is that what we have over here? 102 50 here and 102 50. And then we can rely on the tax return to do the cat tax was at the 183 25 now. So we'll say okay, this is now at 183 25 and so on. And so forth. So that's the general idea with the alimony. Now we'll talk about the alimony on the payment side when the payer has it here. But we might as well kind of give a give a quick look at it. If I was going to page two, we have the alimony that's being paid. So remember that every transaction that says kind of is being treated like a financial income transaction where you have a payer and a payee like an employer employees kind of situation is how the IRS is seeing it because they're saying if it was an alimony situation that's deductible, the one that's paying would basically report it here. Notice they want the social security number just like they do when they want 10 99s from someone paying or the W twos and whatnot. So that if you got the deduction, the IRS is going to say we're this money's our portion of this money's coming out of someone's hide. You got to tell us who you gave it to. Okay, who gave it to you? Who had? And so you're like, okay, it was the X and then and then of course, the IRS goes after them and they say, well, you bet that X better be put in that income on the alimony received line. But that's only before the cutoff date. And then after the cutoff date, then the new then, like I said, the new agreements don't have that in place, which again, you might say that's unfair to the payer side of it. But like I said, the agreement should be worked out. I would think it'd be easier to work out an agreement with there's less tax consequences. And then you just take into consideration that in the actual amounts of the payment, which are no longer subject to to the taxes and so on. But that's that's another story for another time. That's just generally how you plug it into the to the tax return and possibly some tips on how you might discuss an alimony situation with clients and or yourself.