They took out 13,851.90 federal from the 70k from 401K withdrawl in divorce. Is this enough for Nevada? Or will I need to pay more?

[rikuseki]

So I have a complicated question actually. My divorce is on Dec. 31st. I file jointly for us this year despite divorce. I made 150k and she took out 70k from my 401k. She opted for lump sum at once for withdrawl. We moved from California to Nevada. She took money after the move took place so we were in Nevada at the time. I have 3 questions. 1) Will she/I need to pay California taxes on it? 2) They took out 13,851.90 federal from the 70k. This did not seem like enough to me. Can I calculate how much additional she will need to cover when I file? 3) Will this count towards my total income and put me in a different tax bracket?

[Critter-3]

Ok ... since Nevada has no state income tax that is a mute subject.   

AND if the divorce was final as of 12/31/2020 then you do NOT file a joint return because you were no longer married as of midnight on 12/31.   If you already did then you need to correct that asap.  

Now will the 20% federal withholding be enough ?   Be enough for whom ?   Did the court issue a QDRO for the retirement distribution ?    If so did she get the 1099-R form in her name only ?    If so that is her problem to deal with not yours.  

[rikuseki]

So it’s in my best interest to file jointly as I have it in the paperwork I get to file jointly. If I don’t I will file single and have to pay way more in taxes. Paperwork says dec 31st so I don’t know if I can change that, I believe it was actually supposed to be Jan 1st. 

as for her, it’s up to her to pay all taxes for the QDRO. A QDRO was issued and she was granted 70k. That amount in taxes was the amount they took out when she received her distraction. Since I’m filing jointly I’m worried it will increase my tax bracket. It’s very complicated because she is responsible for taxes on QDRO and wants to know how much more she will need to pay. I want to make sure I can collect this when I file since it will be filed jointly. 

[Critter-3]

STOP .... you MUST file correctly ... if the divorce was final as of 12/31/20 then you CANNOT file a joint return.  As of the stroke of midnight on 1/1/2021 if you were not considered married then you are not married for the 2020 tax return even if the judge signed it one minute before midnight.  

Until you are sure on that point then you cannot move forward.   If you WERE still married then you need to discuss this with her to decide how you will file ... she must agree to file jointly otherwise your ONLY option will be to file separately.  Work the numbers both ways and make a joint decision if you both can agree to do so.    

If you are divorced as of midnight   then your ONLY choice will be to file single.  Same for her and if she got the distribution in her name and choose not to roll it into another retirement plan then that is her problem not yours. 

[Critter-3]

FYI ... a court paper cannot force either of you to file a joint return if you were not married at the end of the year ... please check your court documents carefully and maybe call your attorney for clarification.  

[rikuseki]

Thank you so much for you help. Here is my worry. 

if I file separate and the divorce date is Dec 31st 2021 will I have to pay taxes as single for this whole year? My purpose of filing jointly was so I didn’t get screwed in my taxes. Right now my form is married with dependanrts so they don’t take out much in taxes. If I were to say single the whole year it would mean I would owe over 10k in taxes. I guess my question is what do I put so I don’t get destroyed in my taxes 

[xmasbaby0]

Your filing status is determined as of December 31, 2021.   If you are divorced by that date you file as single for the year.  You cannot file a joint return if you are divorced by the year's end.   If you think you are not having enough tax withheld from your paychecks now, then you have a few months left in 2021 to have more withheld by changing the W-4 you give to your employer.

https://ttlc.intuit.com/community/tax-topics/help/what-to-know-about-the-new-2020-irs-form-w-4-emplo...

https://www.irs.gov/pub/irs-pdf/fw4.pdf

https://www.irs.gov/individuals/tax-withholding-estimator

[Critter-3]

The future date of your divorce is something you , the soon to be ex,  both of your attorneys  and the courts will have to agree on if you even have a choice in the matter.    Once you know what the date will be you can plan for income tax filings.   If you have kids than that is another thing to take into consideration especially this year.   I HIGHLY recommend you sit down with a local tax pro to get educated on all your options and what you need to do to get the results you want.    

[Opus 17]

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@rikuseki wrote:

Thank you so much for you help. Here is my worry. 

if I file separate and the divorce date is Dec 31st 2021 will I have to pay taxes as single for this whole year? My purpose of filing jointly was so I didn’t get screwed in my taxes. Right now my form is married with dependanrts so they don’t take out much in taxes. If I were to say single the whole year it would mean I would owe over 10k in taxes. I guess my question is what do I put so I don’t get destroyed in my taxes 

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Yes, your filing status is determined as of Dec 31.  If your divorce is final on or before Dec 31, 2021, then you will file your 2021 tax return as single, as if you were single the entire year.

If you are not divorced yet, you have some ability to negotiate with your spouse and your attorneys to consider the best date to make the divorce official.  However, be aware that your spouse does not have to consent to filing jointly.  If you are still legally married on December 31, 2021, and your spouse does not consent to filing jointly, then you must file as married filing separately, which is usually worse than filing single.  You may want to engage competent tax advice before setting the date.

Regarding the 401(k) distribution, your attorneys need to prepare a Qualified Domestic Relations Order (QDRO) that transfers part of your 401(k) assets to your spouse.  Once the assets are transferred, your spouse is responsible for all the taxes.  They will have the option of rolling over the assets to an IRA, or into their own qualified workplace plan and leaving them for retirement, or they can cash out and pay the taxes.  DO NOT withdraw the money yourself.  That would be a fully taxable distribution to you followed by a tax-free gift to your spouse.  Under a QDRO, your ex will be responsible for any taxes depending on what they do with the money. 

[Opus 17]

1) Will she/I need to pay California taxes on it?

That depends.  If you withdrew the money from your account and gave it to her, you pay all the taxes.  If you had a QDRO and she withdrew the money, she pays all the taxes.

2) They took out 13,851.90 federal from the 70k. This did not seem like enough to me. Can I calculate how much additional she will need to cover when I file?

This question makes no sense.  Why would you cover her taxes on your return, "when I file" as you said.  If you are legally divorced on or before 12/31/2021, then your taxes are your problem for your separate (single or head of household) tax return and her taxes are her problem for her separate (single or head of household) tax return.   It all depends on who owned the account the money was cashed out of.  Either you owned the account and gave her money from your account, or you transferred the money with a QDRO and she cashed it out.  

That said, Federal tax could be 12-26% depending on other total income, so $13,000 could be too much or too little.

3) Will this count towards my total income and put me in a different tax bracket?

Again, this depends on whether you withdrew the money and gave it tax-free to your spouse, or whether you transferred your assets to your spouse with a QDRO and then she cashed it out.  If you used a QDRO, it is her income.  If you cashed out your own account and gave her money, it is your income.

Also, remember that being in a higher tax bracket just not subject all your income to the higher rate, just the income over that threshold.  For example, if the tax bracket dividing line is $80,000 and you earned $85,000, only the top $5,000 is taxed at the higher rate.