Tax Tip of Week

March 18th

Divorced before 2019? How new alimony rules apply

Is alimony still deductible by payers and taxable to recipients? It depends. There is some confusion around recent tax law changes, but the prior rules generally remain in effect for divorce and separation agreements entered into before 2019.

Old alimony rules vs. new rules

Previously, someone paying alimony could deduct payments made under a legally-binding divorce or separation decree, and the recipient was required to report the corresponding amount as taxable income, if these main requirements were met:


  • The spouses don't file a joint return together
  • Payments are made in cash or cash-equivalents (e.g., checks or money orders)
  • Payments go to a spouse or ex-spouse under a divorce or separation instrument
  • The divorce or separation instrument doesn't designate the payments as not being alimony
  • The spouses aren't members of the same household when payments are made
  • There's no liability to make payments after the death of the recipient spouse


However, the new law repeals the deduction, and inclusion in taxable income, for alimony paid under an agreement executed after 2018. Accordingly, the prior rules continue to apply to pre-2019 agreements.

If you paid alimony in 2018, it's deductible on your 2018 return. Going forward, deductions can still be claimed for years in which payments are made under the agreement. Similarly, alimony recipients continue to owe tax on payments on 2018 returns and possibly beyond.

What happens if an existing agreement is modified in 2019 or later? The alimony generally remains deductible by the payer and taxable to the recipient. However, if the modifications expressly state that the new rules apply, future alimony is no longer deductible to the payer and taxable to the recipient.

This can be important information for bargaining in separation and divorce negotiations. Make sure that modifications to an agreement reflect the intent of the parties.

Business Tip of the Month

March 2019

Building a strong business credit rating

When you apply for a personal loan or home mortgage, lenders generally check your credit score. They want to know whether you're a good risk and whether you'll make payments on time. Once that question has been answered in the affirmative, you may be able to negotiate a lower interest rate, more advantageous payment terms or a larger line of credit.

Small companies face similar scrutiny. Although credit bureaus employ different algorithms and consider additional factors when formulating business scores, a strong credit rating can provide your company with substantial benefits. For one thing, it can help you avoid prepayment for materials and services — a good thing for cash flow. It may also place you in a better negotiating position with suppliers and qualify your business for better interest rates and credit terms.

To establish a solid business credit score, consider the following tips:


  • Pay your bills on time. When Experian, Equifax and TransUnion calculate a credit rating, payment history is a defining factor. Small companies are often perceived as inherently risky, so make sure every invoice is paid on time. You'll show lenders that your company is reliable.
  • Watch your credit utilization. Don't max out business credit cards or existing lines of credit. To build a strong rating, try to use 30 percent or less of available accounts. Otherwise, lenders may question your ability to cover outstanding debts.
  • Don't apply for credit too often. If you're inquiring at a financial institution every other month, lenders may wonder whether your business has become overextended.
  • Keep business and personal accounts separate. Open a separate bank account, use a separate credit card, and set up a separate business credit file with all three reporting agencies. Don't allow your company to be negatively influenced by financial missteps in your personal life, or vice versa.

Financial Tip of the Week

March 2019

Applying for the SS spousal benefit? Get the facts
Deciding when to apply for Social Security benefits can be confusing. It's a decision that can impact your retirement income for decades. Spousal benefits, especially, are easily misunderstood. Here are three questions to consider:


  • What is a Social Security spousal benefit? As the term implies, it's income provided under the Social Security program to spouses, current or widowed. (An ex-spouse may also qualify under certain circumstances.) If your spouse or ex-spouse paid into the program, you may be eligible for this benefit, even if you never worked under Social Security.
  • How much will I receive? Your monthly benefit consists of two parts: the amount based on your own work history and the spousal benefit (if applicable). Let's say you're entitled to a monthly benefit of $800 and your higher-earning spouse is eligible for $2,000 a month at his or her full retirement age (FRA). Because half your spouse's benefit ($1,000) exceeds your own benefit, you're entitled to a spousal benefit for the difference. In this scenario, you could collect an additional $200 ($1,000 minus $800) each month.
  • Can I claim a spousal benefit if my spouse isn't currently drawing Social Security? No. However, if you're filing based on an ex-spouse's work record, you may be eligible, even if that person hasn't filed for his or her own benefits.



The spousal benefit rules are complicated. You'll want to consider your spouse's timetable for claiming Social Security benefits, your own benefits, your spouse's likely longevity (a death can affect widow's benefits), previous marriage history (if you expect to claim benefits based on a divorced spouse's work record), and numerous other factors.
Check out the Social Security Administration's Benefits Planner: Retirement page for more information. Call if you have questions about how your Social Security benefits will affect your taxes.

It Makes Sense to Hire Morley Consulting

First-rate accounting services in Morton, PA and Denver, CO and Loveland, CO

Are you being audited by the IRS? Would you like to get a jumpstart on individual tax preparation? If you've been looking for tax services or accounting services, hire Morley Consulting, LLC. Our tax consultants have the skills and knowledge needed to ensure that your individual or corporate documents are correct.

If you've been searching for complete tax services or accounting services, look no further than Morley Consulting. Call our Morton, PA location at 610-544-1094, our Denver, CO location at 303-835-4757 or our Loveland, CO location at 970-663-3564 right away for a consultation.

Ready to get all of your documents in order

Don't spend hours going through your corporate books or compiling your individual tax documents. Turn to Morley Consulting for:



We'll answer all of your questions and make sure every document we file is accurate.

Schedule tax services or accounting services with Morley Consulting as soon as possible. We serve residents of Morton, PA and Denver and Loveland, CO.

Trust a licensed tax professional with your needs

Put the licensed and experienced tax consultants at Morley Consulting to work for you. Our accountant is an enrolled agent and is federally authorized in the field of taxation by the United States Department of the Treasury. He is also a National Tax Practice Institute fellow.

Our tax consultants use a keen eye to complete your individual or corporate paperwork. Rest easy knowing you're ready for retirement or the upcoming tax season. Set up a free consultation at Morley Consulting in Morton, PA or Loveland or Denver, CO today.

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