I am the ex spouse. Our divorce decree commands a portion of my ex wife's retirement be allotted to me. She has paid me by personal check for the past 20 years and I was told by a bankruptcy account after furnishing her with the military retirement income amount and a copy of the divorce decree, that this income was non taxable income. Our divorce was finalized in 2005 if this information is necessary. Can you confirm that this income is or is not taxable income?
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In general, retirement income is taxable. But the military doesn't follow the rules the IRS requires of everyone else. In the civilian world, if a court orders that your spouse pay you a part of their retirement income, they get a qualified domestic relations order (QDRO) that they give to the retirement plan payer. Then, the pension plan pays a portion of the pension directly to you and issues you a 1099-R for your portion of the pension, and it is taxable to you. The military (DFAS) does not follow this rule for spouses who are married less than 10 years. So even though, under IRS regulations, your spouse can use a QDRO to make sure they only pay tax on their half and you pay tax on your half, that doesn't happen with some military ex-spouses. DFAS pays the full pension to the retiree, the retiree is responsible for making payment to the other spouse, and the other spouse does not get a 1099-R from DFAS.
What happens next is more on the retiree than the spouse. For example, the spouse may object to paying the tax on their full retirement even though they have to send part of it to the ex-spouse every month. In this case, there are three possible answers.
A. The payment is designated as alimony or support in the divorce decree. The retiree can deduct the payment and the ex-spouse must report it as taxable income.
B. If the payment is not designated alimony, the retiree spouse can attempt to issue tax paperwork to the ex-spouse to show the IRS that the retiree is only responsible for tax on their portion and the ex is responsible for the ex's portion. This is something that I keep forgetting and so I have asked some other experts to comment and remind me, if this is even possible, and how to do it.
C. The retiree spouse is stuck paying the full tax and there is nothing to be done about it.
You are the other ex-spouse (not the retiree). You haven't explained what your situation has been for the past 20 years. It sounds from your question that you have been paying income tax, but you don't clearly say that. Here are my thoughts.
1. If you have been getting a 1099-R from DFAS, then there must have been a QDRO and you must have been married more than 10 years. You are correct to be paying taxes and your bankruptcy advisor is wrong.
2. If you have not be getting a 1099-R and were married less than 10 years, but have been paying tax, then I would pay attention to the other expert's answers about situation B above, and whether the retiree spouse can actually shift the tax burden. Why have you been paying the tax, and what paperwork have you been getting from your ex-spouse or the government?
3. If you have not been paying tax and your ex has not raised this as an issue, then just carry on as you have been.
We were married 12 years and because I was undergoing back surgery at the time she served me divorce papers, I was ultimately awarded temporary alimony as well as 26.25% of her retirement, in 2005 The alimony stopped in 2007 but the military portion has continued to today and will do until she dies, to the best of my knowledge. I was never issued a 1099 or any other form that related to that retirement portion and I was determined permanently disabled in 2014 at which time I began receiving disability income and that's what I've been paying taxes on. I have over the years, attempted to get my ex wife to have my checks sent from dfas directly to me but those requests fell on deaf ears and she simply refused my requests by not giving me the courtesy of a response or explanation. I sent her the filled out dfas forms at least 3 times and nothing ever happened. I can't speculate what happened to those documents after I mailed them.
@MichaelEgan007 wrote:
We were married 12 years and because I was undergoing back surgery at the time she served me divorce papers, I was ultimately awarded temporary alimony as well as 26.25% of her retirement, in 2005 The alimony stopped in 2007 but the military portion has continued to today and will do until she dies, to the best of my knowledge. I was never issued a 1099 or any other form that related to that retirement portion and I was determined permanently disabled in 2014 at which time I began receiving disability income and that's what I've been paying taxes on. I have over the years, attempted to get my ex wife to have my checks sent from dfas directly to me but those requests fell on deaf ears and she simply refused my requests by not giving me the courtesy of a response or explanation. I sent her the filled out dfas forms at least 3 times and nothing ever happened. I can't speculate what happened to those documents after I mailed them.
If you are
1) receiving disability checks that are taxable to you,
2) and also your ex-wife is sending you part of her retirement pay,
3) and you are not getting a 1099-R from DFAS,
Then it seems like the portion of retirement pay would not be taxable to you because your ex-wife is paying all the taxes.
Have you also been paying taxes on the retirement pay? How, and using what forms?
I pay taxes on the disability income but have never paid taxes on the retirement portion.
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