Split 1099-R income with ex-spouse

[MC7691]

Ex-spouse received pension payments monthly all of 2019. Jan-May we were married so income is 50/50. June-December the pension plan paid him all as the right paperwork was being processed to split it monthly. Instead, he paid me my 50% portion from his personal checking account.

Now he as a 1099-R with the entire amount and I don't have any 1099-R for my 50%.

1) How does the income get report on his tax form income (match 1099-R, take 50% and not match 1099-R)?

2) How does the income get reported on my tax form income (my 50% although no 1099-R, $0)?

Thanks.

[DianeC958]

1) He would need to report the full amount on his tax return to match the 1099-R he received.

 If the amount he paid you is not designated as alimony in your divorce documents he can report it in TurboTax as Less Common Income> Other Reportable Income.  In that section he can put in a description and the amount as a negative amount.

2) You can file the income you received as a substitute 1099-R in the Retirement Plans Section of TurboTax

[hokietrax]

Have reported this (Military Pension Division--not alimony) as a negative in Miscellaneous Income as "other income not already reported on a W-2 or 1099". TT flags the negative number and will not allow an e-file. 

If instead this amount is moved to "other reportable income" will TT allow the negative income number to pass?

Or will TT choke on it either way, and I get the pleasure of printing and mailing my return?

Thank you.

[Critter]

You can report it as other income on Sch 1  line 8. Here's how to enter it in TurboTax.

• Click the Federal Taxes tab ( Personal in the Home & Business version)
• Click Wages & Income. (Personal income in the H & B version)
• On the screen "Your 2019 Income Summary," scroll all the way down to the last section, "Less Common Income."
• Click the Start or Update button for the last topic, "Miscellaneous Income, 1099-A, 1099-C."
• On the next screen, "Let's Work on Any Miscellaneous Income," scroll down and click the Start or Update button for the last topic, "Other reportable income."
• The next screen asks, "Did you receive any other taxable income." Click Yes.
• On the next screen, "Other Taxable Income," enter a description and the amount. Click Continue.
• On the next screen click Done.

[hokietrax]

Confirmed, and thank you, @Critter !

Caveat: I'm not a tax expert.

Some explanation: pension division for military retirees is an entitlement, and not alimony; as such, it is handled a bit differently: "When the pension is divided in a written instrument and the payments end no later than the death of the payee, the military retirement payments are includable in the gross income of the payee and are excludable from the payor’s income." (https://familylawyermagazine.com/articles/taxes-and-military-pensions-the-long-and-short-of-it/)

Additionally, per Carla M from TurboTax's NC call center (who discussed with their military expert), the way to do this is to claim the pension payments as "Other Reportable Income" (not 'other Wages' as I previously thought). The description is "Military Retirement Pay to ex-spouse (xxx-xx-xxxx) per USFSPA"

USFSPA is the Uniformed Services Former Spouse Protection Act

Note: TurboTax flagged the negative number when listed under 'Other income not already reported on a Form W-2 or Form 1099' -- TT was fine when instead the same negative # was used under 'Other reportable income.'

[rjswifty]

That takes care of the income side. How are the associated taxes handled?

[hokietrax]

Associated taxes for whom? Your question is unclear, but my attempt to answer: for my ex-spouse, receiving the income, it's taxed as income (ex-spouse's responsibility to file correctly), for me it ends up acting as a deduction, it's just entered here as negative income. 

[rjswifty]

If I reduce my 1099 (pension) for the income I paid my ex-spouse during the year, doesn't the taxes I paid on that same income also have to be reduced accordingly?

[hokietrax]

Yes. If I remember correctly, you will see your Adjusted Gross Income (Gross Income minus adjustments) go down by that amount. So your taxable income decreases. Let's just say for example that you're providing $500/month. Your taxable income will go down by $6000, your spouse's will increase by $6000 assuming they file correctly. (Of course, keep receipts of your payments to the ex-spouse in case they do not correctly claim the extra income and the IRS comes calling). Try it with and without, and you'll see the difference in AGI.

[dmertz]

Whatever amount is reported on a Form 1099-R sent to you is income that is includible on your income tax return.  For income tax purposes, you cannot split the Form 1099-R to reduce the amount that is reported on line 4 of your Form 1040.

Separately, if you pay alimony to your ex-spouse (the amount of which is determined by your divorce or separation instrument), whether or not the alimony is deductible on your tax return and includible as income on your ex-spouse's tax return depends on when the divorce or separation instrument was executed or last modified.  If the amount of alimony you pay your ex-spouse includes some in proportion to the amount on amount on the Form 1099-R, if the date that the divorce or separation instrument was executed was after December 31, 2018, the alimony is neither deductible by you or includible as income by your ex-spouse.  The same applies if the divorce or separation instrument executed by December 31, 2018 but was modified after that date and specifies that this same repeal of the alimony deduction applies.

[hokietrax]

As I understand it, military pension division is not necessarily alimony, but rather a division of community property, no?

[dmertz]

hokietrax, I only see military pensions mentioned in your replies, so it's not clear that any of those asking here are asking in regard to military pensions.  

Military pensions apparently can be problematic because they can be slow to implement payments to an alternate payee.  One could perhaps nominee the income by issuing the ex-spouse a Form 1099-R for the ex-spouse's portion and filing this form and a corresponding Form 1096 with the IRS.  However, I've never been able to find any IRS guidance on how to report the details of this involving a Form 1099-R.  I suspect that one should show the entire original amount on 2020 Form 1040 line 5a and only the amount taxable to the original recipient on line 5b, then include an explanation statement describing being the nominee of the ex-spouse's portion and stating the gross and taxable amounts transferred to the ex-spouse.  Other types of Form 1099 income are generally reported on some form of the tax return other than directly on Form 1040 where the nominee income can be listed as a subtraction, obviating the need for a separate explanation statement.

Still, if the divorce or separation instrument does not specify that the military pension is to be paid directly to the ex-spouse as an alternate payee, the nominee process would probably be inappropriate.

hokietrax, note that the reference you provided in mid 2020 was updated on January 7, 2021.  I don't have any way to know what it said previously, so I don't know if anything relevant to the discussion here changed.  It doesn't seem to have been updated for the current Form 1040 line numbers, though, still referring to Form 1040 line numbers for years prior to 2018.

[rjswifty]

Hi Diane,

That all makes sense to me as far as income reporting. What I don't understand is how the taxes, associated with the that income, is handled. 

Don't I have to also reduce the taxes paid for the amount associated with the reduced income?

[dmertz]

Your tax liability is calculated on your tax return and any tax withholding from the distribution is credited on your tax return as well.  With a reduced amount of taxable income, your calculated tax liability is reduced and if your tax withholding exceeds your tax liability, you get a tax refund.

[VolvoGirl]

I don't know if Diane's answer was right.  Basically you have to report the whole 1099R income on your return and you report all the tax withholding .  Period.  You might be able to report what you give your ex separately as Alimony.  But until the retirement plan splits it up and pays each of you and gives you each your own 1099R, you have to report 100% as income.