If you receive military retirement payments made directly to you from a former military spouse, there are a few ways to report the income received. If you were not issued a 1099-R, either from DFAS or your former spouse, the next route is to report the income as alimony.
If DFAS will not split the reporting:
If you've received no form, you can treat the payments as alimony for tax purposes so they are included in the gross income of the recipient spouse and deductible by the military spouse. While this may be an easier solution, the problem with this is simple, the division of retirement pay is NOT alimony. If you choose this route, it is highly recommended that a very clear statement be attached to each return along the lines of “The alimony designation is solely for the proper allocation of military retirement received by each party.” Since TurboTax does not support statements at this time, your return will need to be paper-filed.
To add alimony received to your return in TurboTax:
- Once in your return, click Federal Taxes tab, then Wages & Income
- Scroll down to Less Common Income
- Click Start next to Alimony Received
The recommended route of reporting is for the retired military member to issue an IRS Form 1099-R to the recipient spouse for the amount paid and then report the retirement income. However, often, the former non-military spouse is not issued a Form 1099-R.
Additionally, your former spouse can verify whether they qualify for DFAS to split the reporting and issue separate Forms 1099-R to each of you, which makes reporting much easier on both parties.
Requirements for having DFAS split reporting:
Even with a court ordered division of a service member’s military retirement, DFAS (Defense Finance and Accounting Service) will not issue payment directly to the non-military spouse unless the “10/10/10 rule” has been satisfied. (at least 10 years of marriage overlapping 10 years of creditable military service, per 10 U.S. Code §1408(d)(2))
Because military retirement is deemed a federal entitlement, not a qualified pension plan, no Qualified Domestic Relations Order is required.
If you meet the requirements, DFAS will issue both the former service member and the former spouse separate Forms 1099-R for reporting.
To request split payment from DFAS use the following:
- DD Form 2293, Application for Former Spouse Payments from Retired Pay.
- Certified copy of the court order dividing the military retirement (certified within two years, per the DOD Financial Management Regulation, Volume 7B, Chapter 29, Section 290401).
- DFAS-CL Form 1059, Direct Deposit Form for payment directly to a bank account.
- IRS Form W-4P, for tax withholding.