If you are receiving a Form 1099-R that shows the entire amount as your income, it is taxable (to you).
Since you are required to remit some portion of that income to your former spouse, you can reduce your taxable income by the amount you must pay under the terms of the Qualified Domestic Relations Order (QDRO)
From the IRS:
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.
https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-qdro-qualified-dome...
You should be able to arrange for DFAS to send your ex-spouse a 1009-R for their payment, and reduce your 1099-R by the same amount. Until then, here is how to adjust your income to reflect the payment:
First Option:
You can show a negative number in Line 21 with the caption, “QDRO Distribution to (Name), SSN xxx-xx-xxxx.” The negative number on Line 21 will adjust the income of the reported payee to the correct amount. The reported payee (you) must issue a Form 1099-R to the nominee payee for nominee’s share of the distribution.
You can enter a negative income adjustment with the following menu path:
- Federal Taxes
- Wages & Income
- Less Common Income
- Miscellaneous Income
- Start
- Other Reportable Income
- Start
- Other Taxable Income
- Description = “Distribution to Nominee YYY, SSN xxx-xx-xxxx”
- Amount = -$xxx
TurboTax will transfer this to your Form 1040, Line 21, Page 1.
You can e-file with this approach because the disclosure is on the face of the return at Line 21. You can also e-file using the step below instead.
Second Option:
If the named annuitant (you) does not want to issue a Form 1099-R to the nominee, then the nominee can enter it as a substitute Form 1099-R (requires Form 4852), by choosing that selection when they start the entry, i.e. "I need to prepare a substitute 1099R."
When signed into your TurboTax account (online or desktop):
1. Use the Search box in the upper right
2. Search for 1099r
3. Jump to 1099r
4. Continue to enter your Form 1099R from the statement and check the box for the statement above. (see image attached).
5. The nominee will enter the named annuitant's information as the "Payer", including SSN as "Payer's ID",
