@macuser_22
IRS publication 504 is quoted below.
I am assuming that there is a QDRO as part of this divorce. Normally, with a QDRO, an IRA or a pension is divided between the spouses and the funds belonging to the ex are placed in an account in the ex’s name and the ex gets their own separate 1099-R for the distributions.
Here, the payer (DFAS) will not separate the accounts and issue a separate 1099R if the spouses were married less than 10 years. That does not mean that the QDRO does not apply or that the military spouse is required to pay taxes on the full pension benefit. The QDRO still applies and the taxpayer is only responsible for income tax on the portion of the pension benefit they actually receive. But lacking the proper paperwork, the question is how should the military spouse report their pension payment so that they only pay tax on the portion that is assigned to them under the QDRO.
(Of course, if there is no QDRO, the taxpayer needs to get one ASAP, even if DFAS won’t honor it. The taxpayer needs the QDRO to demonstrate the IRS that they do not owe income tax on the full pension. A QDRO is not necessarily a separate piece of paper, the divorce judgment may qualify on its own depending on state law.)
Qualified Domestic Relations Order
A qualified domestic relations order (QDRO) is a judgment, decree, or court order (including an approved property settlement agreement) issued under a state's domestic relations law that:
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Recognizes someone other than a participant as having a right to receive benefits from a qualified retirement plan (such as most pension and profit-sharing plans) or a tax-sheltered annuity;
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Relates to payment of child support, alimony, or marital property rights to a spouse, former spouse, child, or other dependent of the participant; and
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Specifies certain information, including the amount or part of the participant's benefits to be paid to the participant's spouse, former spouse, child, or other dependent.
Benefits paid to a spouse or former spouse.
Benefits paid under a QDRO to the plan participant's spouse or former spouse must generally be included in the spouse's or former spouse's income. If the participant contributed to the retirement plan, a prorated share of the participant's cost (investment in the contract) is used to figure the taxable amount.
