topic Re: IRA Deduction in Retirement tax questions

IRA Deduction

mbyers — Fri, 01 May 2020 18:20:13 GMT

I was 70 years old all of 2019. I deducted $66,000.00 from my IRA to pay my ex wife a divorce settlement. Am I responsible for the federal tax on this amount?

Re: IRA Deduction

macuser_22 — Fri, 01 May 2020 18:41:11 GMT

I think you mean that you distributed from your IRA. You are responsible for any tax on the distribution that was from your IRA. The tax law does not care what you did with the money.

Your divorce agreement should specify whether you can subtract the amount of tax that you must pay from the amount sent to your spouse. On division of retirement assets, who ultimately pays the tax, is usually part of the agreement. That is a legal issue that you should ask your divorce attorney.

Re: IRA Deduction

mbyers — Fri, 01 May 2020 18:35:25 GMT

Thanks. Very helpful.

Re: IRA Deduction

Critter — Fri, 01 May 2020 19:20:14 GMT

Sadly this is taxable to you ... for it to be taxable to the EX the court had to issue a QDRO and the IRA custodian would have rolled that amount into an IRA for the spouse and if they choose to to take a distribution then they are on the hook for the taxes.

Re: IRA Deduction

macuser_22 — Fri, 01 May 2020 20:08:48 GMT

@Critter QDRO's do not apply to IRA's. QDROs apply only to employee benefit or pension plans subject to the (ERISA).

Re: IRA Deduction

dmertz — Fri, 01 May 2020 23:54:55 GMT

With regard to IRAs, if you were not to be responsible for the taxes on any distribution of your ex's share, the divorce agreement should have specified that your ex's share of the IRA be transferred trustee-to-trustee to an IRA in your ex's name. Such a "transfer incident to divorce" is neither a distribution nor a rollover and is not reportable. Because the distribution was paid to you, you are responsible for including the distribution on your tax return.