 Income tax 2021-2022. Penalty on early withdrawal of savings and alimony paid. Get ready to get refunds to the max. Diving into income tax 2021-2022. Most of this information can be found in the Form 1040 Instructions Tax Year 2021 found on the IRS website, irs.gov, irs.gov. Income tax formula focused on the adjustments to income, which you might hear being called the above the line deductions, the Schedule 1 deductions, the deduct deductions for adjusted gross income, keeping them separate in our mind from the other deductions, standard deductions, and the itemized deductions. First page of the Form 1040, we're looking at Line 10, adjustments to income from Schedule 1. Here is Schedule 1, Part Number 2, focused on Line 18, penalty on early withdrawal of savings. Not something that you're going to see too much, but if you see that, then Line 18 here, and then we have the alimony paid. This is kind of the reverse or other side of the income side that we saw on alimony on subject to the alimony. So let's just recap the alimony situation a bit here. We'll get into more detail soon. So when we have the alimony situation, note that if there's a separation, like a divorce, then the terms of the divorce will typically have the payments. If there's any payments going from one spouse to another spouse was generally categorized under two main categories, at least for taxes, either child support or alimony. Now, those had a significant difference in the tax treatment of the payments, which could lead to people having kind of more complex scenarios in terms of how they're going to set up the agreement because you want to take into consideration the tax implications. So if the information was transparent and everybody knew all the factors involved, then you would have to take into the tax considerations and then just put that into your agreement. However, it leads to some an added level of confusion, which I think is why they basically said we're going to stop making a difference or distinction between the alimony and the child supports and these kind of divorce agreements. And I think that makes it easier for basically the two people that are making their agreement not to have to have this added complexity and just come to the terms with their agreement. It'll probably be a different agreement based on the different scenario, the different situations, if everybody had all the information. I think that was basically the general idea. So prior to this, to this then, then they had this difference and that would mean that the child support would be something that wouldn't have to be recorded as income. And it wouldn't be something that would be deductible. And the idea there would be that each spouse is benefiting if it's child support because it's for the child and it's both spouse's child in that situation. However, if it was alimony, then it's not for a joint child, it's for the support of a spouse. And therefore it would be something it used to be that it had to be recorded as income by the recipient and it had to be reported as or it could be recorded as a deduction by the one that is paying. So obviously if you already had the agreement set up, then if you're the payer, you would like to categorize it as alimony because then you can take the deduction, which would be a benefit for taxes. And if you were the recipient, you would like to categorize it as child support because then you would not have to record it as income. And obviously the IRS wants to have a situation that if one side gets the deduction, the other side has to record it basically as income. Now, if everybody was completely transparent on that, then they would probably just adjust the agreement to pay, possibly pay a little bit more, given the fact that there's a tax benefit from the payer and the recipient has to report it as income. If you took that away, then you would think that the agreement would take that into consideration and possibly you can pay a little bit less of the alimony because it will go further given the fact that the fact that the recipient doesn't have to record it as income. So I would think that if all the information was transparent, it would just be the negotiation would come out in a similar fashion, just take it into consideration, the added regulations, I would think would be kind of the thought process. But they can't go back and adjust the thing that happened in the past. You don't want to take an agreement that had already been made based on the prior rules and then adjust it. So they had to put the new law in going forward. So that means the new agreements that go into place are most likely not going to have a tax implication here. So you're not going to have the deduction side or the income side. And if it was an older agreement, then you might still have the alimony situation. Now, if it's a payer of alimony, then they're getting the benefit just like anything else, just like with the W-2s and the 1099s, the government has the leverage on the payer, in this case, the payer of the alimony to the payee, the payer spouse. So that means that they're going to force the payer to give them the information if you want the deduction, meaning the social security number of the person, the other spouse that you're paying, so they can make sure that the other spouse reported it as income. It's got to be symmetrical in that sense. And then they have the date here to help to determine if it was before the cutoff date where there was a change in the law. Okay. So the penalty on early withdrawal of savings, the form 1099int or form 1090id will, you received will show the amount of any penalty you were charged. So that should be a fairly straightforward thing. You don't see it all the time, but if you do see it, then it'll be picked up on the 1099. And now you can see where you're going to be putting that. So here is the 1099int and we're focused on line number two, which is the early withholding penalty. If you're using tax software, it'll often help you out to find line number two. And then you can, you know, you can use the tax software and then kind of reverse engineer what is happening with it by looking at the tax forms. Alimony paid if you made payments to or for spouse or former spouse under a divorce or separation agreement entered into on or before December 31st, 2018, you may be able to take this deduction. So remember the cutoff date here, the agreement happening before that cutoff date because it was after that cutoff date. Then we don't have that same kind of distinction between alimony and basically child support. You can't take the deduction for alimony payments you made to or for your spouse if you entered into your divorce or separation agreement after December 31st, 2018 or if you entered into the agreement on or before December 31st, 2018 and the agreement was changed after December 31st, 2018 to expressly provide that alimony received is not included in your former spouse's income. So when you have when you re-up the agreement, just be careful on how you're doing that to take into consideration whatever tax implications might might be taken into consideration there as well. So you can use tack topic 452 or see publication 504 for more detail. You can find those on the IRS website irs.gov irs.gov. Alimony paid online 19 C into the amount enter the month and year of your original divorce or separation agreement that relates to this deduction for alimony paid.