Deductions & credits

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@Opus 17 wrote:

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@macuser_22 wrote:

I did not miss that.  It does not change the fact that only the financial institution that holds the account can split and issue 1099-R's.     I believe that the IRS defers to the plan rules for QDRO's.    The court order only *allows* a QDRO, but it is up to the plan rules to put it into place.

I disagree.  I don't see anything in the law or those FAQs that makes implementing the QDRO discretionary on the part of the plan administrator.  A QDRO "creates or recognizes the right of an alternate payee" to a portion of the participant's benefits.  The law goes on to say "the plan administrator shall promptly notify the participant and each alternate payee of the receipt of such order" and "Each plan shall establish reasonable procedures to determine the qualified status of domestic relations orders and to administer distributions under such qualified orders."  Elsewhere the tax code says "Each pension plan shall provide for the payment of benefits in accordance with the applicable requirements of any qualified domestic relations order."

 

Arguing that this military pension is not taxable to the ex-spouse because DFAS did not prepare a separate 1099-R is the same as arguing that if my clients don't issue a 1099-NEC, then I don't have to report the income.  (However, because DFAS is part of the federal government, it is virtually impossible to force them to issue the separate 1099-Rs, as would be required by Fidelity or any other 401(k) plan administrator, for example.)

 

If the divorce order contains the required language (as described later), then the ex-spouse's portion of the pension is not taxable to the taxpayer.  The taxpayer may want professional advice on how best to report this on their tax return.  

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Even the IRS says what I am saying.

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-qdro-qualified-dome...

A QDRO is a judgment, decree or order for a retirement plan to pay child support, alimony or marital property rights to a spouse, former spouse, child or other dependent of a participant. The QDRO must contain certain specific information, such as:

• the participant and each alternate payee’s name and last known mailing address , and
   
• the amount or percentage of the participant's benefits to be paid to each alternate payee.

A QDRO may not award an amount or form of benefit that is not available under the plan.

A spouse or former spouse who receives QDRO benefits from a retirement plan reports the payments received as if he or she were a plan participant. The spouse or former spouse is allocated a share of the participant's cost (investment in the contract) equal to the cost times a fraction. The numerator of the fraction is the present value of the benefits payable to the spouse or former spouse. The denominator is the present value of all benefits payable to the participant.

A QDRO distribution that is paid to a child or other dependent is taxed to the plan participant.

An individual may be able to roll over tax-free all or part of a distribution from a qualified retirement plan that he or she received under a QDRO. If a person receiving QDRO payments is either the employee's spouse or former spouse (not as a nonspousal beneficiary), then he or she can roll it over, just as if he or she were the employee receiving a plan distribution and choosing to roll it over.

IRS Pub 575 says the same thing.

"A QDRO may not award an amount or form of benefit that isn't available under the plan."

If the plan will not provide it because the plan requirements have not been met then is is not available under the plan.

Every reference that I have provided says the same thing.