Tag Archives: tax filing

Tax Effects of Divorce or Separation

If you are divorcing or recently divorced, taxes may be the last thing on your mind. However, these events can have a big impact on your wallet. Alimony and a name or address change are just a few items you may need to consider. Here are some key tax tips to keep in mind:

  • Child Support. Child support payments are not deductible and if you received child support, it is not taxable.
  • Alimony Paid. You can deduct alimony paid to or for a spouse or former spouse under a divorce or separation decree, regardless of whether you itemize deductions. Voluntary payments made outside a divorce or separation decree are not deductible. You must enter your spouse’s Social Security Number or Individual Taxpayer Identification Number on your Form 1040 when you file.
  • Alimony Received. If you get alimony from your spouse or former spouse, it is taxable in the year you get it. Alimony is not subject to tax withholding so you may need to increase the tax you pay during the year to avoid a penalty. To do this, you can make estimated tax payments or increase the amount of tax withheld from your wages.
  • Spousal IRA. If you get a final decree of divorce or separate maintenance by the end of your tax year, you can’t deduct contributions you make to your former spouse’s traditional IRA. You may be able to deduct contributions you make to your own traditional IRA.
  • Name Changes. If you change your name after your divorce, be sure to notify the Social Security Administration. File Form SS-5, Application for a Social Security Card. You can get the form on SSA.gov or call 800-772-1213 to order it. The name on your tax return must match SSA records. A name mismatch can cause problems in the processing of your return and may delay your refund. Health Care Law Considerations.
  • Special Marketplace Enrollment Period. If you lose health insurance coverage due to divorce, you are still required to have coverage for every month of the year for yourself and the dependents you can claim on your tax return. You may enroll in health coverage through the Health Insurance Marketplace during a Special Enrollment Period, if you lose coverage due to a divorce.
  • Changes in Circumstances. If you purchase health insurance coverage through the Health Insurance Marketplace, you may get advance payments of the premium tax credit. If you do, you should report changes in circumstances to your Marketplace throughout the year. These changes include a change in marital status, a name change, a change of address, and a change in your income or family size. Reporting these changes will help make sure that you get the proper type and amount of financial assistance. This will also help you avoid getting too much or too little credit in advance.
  • Shared Policy Allocation. If you divorced or are legally separated during the tax year and are enrolled in the same qualified health plan, you and your former spouse must allocate policy amounts on your separate tax returns to figure your premium tax credit and reconcile any advance payments made on your behalf. Publication 974, Premium Tax Credit, has more information about the Shared Policy Allocation. For more on this topic, see Publication 504, Divorced or Separated Individuals.

SOURCE:  IRS Summertime Tax Tip 2016-23

Are you required to file a Form 1099 or other information return?

If you made or received a payment during the calendar year as a small business or self-employed (individual), you are most likely required to file an information return to the IRS.

Made a Payment

If, as part of your trade or business, you made any of the following types of payments, use the link to be directed to information on filing the appropriate information return.

  • Payments, in the course of your trade or business: (1099-MISC) (Note: It is important that you place the payment in the proper box on the form. Refer to the instructions for more information.)
    • Services performed by independent contractors or others (not employees of your business) (Box 7)
    • Prizes and awards and certain other payments (see Instructions for Form 1099-MISC, Box 3. Other Income, for more information)
    • Rent (Box 1)
    • Royalties (Box 2)
    • Backup withholding or federal income tax withheld (Box 4)
    • Crewmembers of your fishing boat (Box 5)
    • To physicians, physicians’ corporation or other supplier of health and medical services
      (Box 6)
    • For a purchase of fish from anyone engaged in the trade or business of catching fish (Box 7)
    • Substitute dividends or tax exempt interest payments and you are a broker (Box 8)
    • Crop insurance proceeds (Box 10)
    • Gross proceeds of $600 or more paid to an attorney (generally, Box 7, but see instructions as Box 14 may apply)
  • Interest on a business debt to someone (excluding interest on an obligation issued by an individual) (1099-INT)
  • Dividends or other distributions to a company shareholder (1099-DIV)
  • Distribution from a retirement or profit plan or from an IRA or insurance contract (1099-R)
  • Payments to merchants or other entities in settlement of reportable payment transactions, that is, any payment card or third party network transaction (1099-K)

Received a Payment and Other Reporting Situations

If, as part of your trade or business, you received any of the following types of payments, use the link to be directed to information on filing the appropriate information return.

  • Payment of mortgage interest (including points) or reimbursements of overpaid interest from individuals (1098)
  • Sale or exchange of real estate (1099-S)
  • You are a broker and you sold a covered security belonging to your customer (1099-B)
  • You are an issuer of a security taking a specified corporate action that affects the cost basis of the securities held by others (Form 8937)
  • You released someone from paying a debt secured by property or someone abandoned property that was subject to the debt (1099-A) or otherwise forgave their debt to you (1099-C)
  • You made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment (1099-MISC)

Not Required to File Information Returns

  • You are not engaged in a trade or business.
  • You are engaged in a trade or business and
    • the payment was made to another business that is incorporated, or
    • the sum of all payments made to the person or unincorporated business is less than $600 in one tax year (unless the recipient is an attorney or law form, see specific instructions for 1099-MISC for further details).

All information comes from : https://www.irs.gov/businesses/small-businesses-self-employed/am-i-required-to-file-a-form-1099-or-other-information-return

New Earned Income Credit (EIC) Documentation Requirement

As the taxpayer claiming a child (or children), you need to provide documentation that the child/children actually live with you.  Below is a list of documents that may be used to support that claim:

  • School records or statement showing the child’s (your) address
  • Landlord or property management statement
  • Health care provider statement
  • Medical records
  • Child care provider records
  • Placement agency statement
  • Social service records or statement
  • Place of worship statement
  • Indian tribal official statement
  • Employer statement

Be sure to include at least one of these things with the documentation you provide to your tax preparer to do your tax return if your income is low enough that you expect to qualify for the EIC.

If you are claiming a disabled child, you will need to prove the disability by providing at least one of the following:

  • Doctor statement
  • Other health care provider statement
  • Social services agency or program statement

Lastly, if a Schedule C for a self-employed business is filed as part of the tax return, the tax preparer must document the existence of the business and document what records were used to determine the business income and expenses claimed for the business.  These records to submit to your preparer include the following:

  • Business license
  • 1099-MISC forms
  • Records of gross receipts
  • Income summary
  • Expense summary
  • Bank statements

These are permanent documentation requirements for 2013 tax returns and beyond for anyone claiming the federal Earned Income Credit.