Are early withdrawals from a retirement account that was set up by a QDRO subject to 10% early withdrawal penalties? Do I simply use the "Alternate Payee under QDRO" box?

[Coleen3 · Accepted solution]

Yes, to take advantage of the exception, use Alternate Payee under QDRO.

If it was paid under a Qualified Domestic Relations Order (QDRO), AND the distribution was from a Qualified Plan (401(k), etc.), you could be excepted from the penalty. This exception DOES NOT apply to distributions from IRA plans.

[dmertz]

It's a bit unusual that a Form 1099-R for a distribution from a qualified retirement plan paid to you as an alternate payee under a QDRO would not have code 2 to indicate that the distribution is not subject to penalty.

[bph43]

Yah, I called TIAA-CREF and asked about that.  They said there wasn't a specific QDRO code, but they have said all along that this money wasn't subject to the 10% early withdrawal penalty.  They were hesitant, however, to go on record with specific tax advice to my situation.

[Tenacious1]

I have a bit of a twist in my case and could really use some expertise.  

QDRO dispursement was paid in early 2019 however according to the dispursement company, funds were finalized on 12/31/18.  I never received the original 1099-R they claimed they mailed. This came to my attention upon calling the dispursement company to request the 1099-R while gathering statements to file my 2019 taxes. 

Q1. The dispursement came directly from my ex's 401K plan to me with Fed and State taxes withdrawn and the dispursement code on the 1099-R is 2, however I am under 59 1/2. Am I subject to the 10% early withdraw penalty?

Q2. If I'm not subject to the early withdraw penalty, is it necessary to even file the 1099-R?

Q3. If it is necessary, can I file it on my 2019 taxes or am I required to amend the 2018 taxes?

I appreciate any assistance I can get!!

[dmertz]

A1.  No, you are not subject to an early-distribution penalty.  Distributions to an alternate payee under a QDRO are exempt from the early-distribution penalty.

A2.  Yes, you must file the Form 1099-R.  The distribution is taxable to you, so it must be reported.

A3.  Assuming that the IRS has not already caught that the Form 1099-R is missing from your 2018 tax return and made the necessary adjustment, you must amend your 2018 tax return to add this Form 1099-R.

[Tenacious1]

Thank you!!