Question

For the last 10 years, you prepared the joint tax returns for Dominic (husband; age 40) and Dulce (wife; age 35) Divorcio. In 2018, they got a divorce and remained as your separate tax clients. Under the dissolution decree, Dominic has to pay Dulce $2,500 per month alimony, which he does for the current year. You have completed Dominic's tax return for the current year and you deducted the required alimony payments to Dulce on Dominic's Form 1040. Dulce came in to have you prepare her tax return and refused to report her alimony received as income. She stated, "I am not going to pay tax on the $30,000 from Dominic. She views the payments as "a gift for putting up with him for all those years of marriage." Dulce will not budge on excluding this alimony from income. Would you sign the Paid Preparer's declaration (see example above) on this return? Why or why not? o a 2

Answer 1

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Answer-

No. You should not sign Dulce's tax declaration form. Reason: The tax law requires the full amount of alimony received to be included in the income declaration if the ex-spouse paying the alimony is claiming it as a deduction in their tax declaration. In this case, since Dominic has deducted the alimony's payment in his Form 1040, it is mandatory for Dulce to include it in her return. If Dominic had not been claiming this amount as a deduction in his return, then only Dulce could have excluded it as an income in her return.