Issue a 1099 to former ex spouse for Military retirement

[DG47]

I have been paying an ex spouse a portion of my military retirement and need to issue her a 1099 and amend my tax return to reflect that? Turbo Tax does not mention or allow anywhere I can insert that in my amended return? How do I amend my tax return to reflect what I have paid her for 2021 and also previous years? 

[DoninGA]

Doesn't she already receive a Form 1099-R from DFAS for income from your pension?

Or have you been paying her directly?

[DG47]

I have been paying her directly. 

[DoninGA]

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@DG47 wrote:

I have been paying her directly. 

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To enter alimony paid -

• Click on Federal Taxes (Personal using Home and Business)
• Click on Deductions and Credits
• Click on I'll choose what I work on (if shown)
• Scroll down to Other Deductions and Credits
• On Alimony Paid, click the start or update button

Or enter alimony paid in the Search box located in the upper right of the program screen. Click on Jump to alimony paid

Alimonies for divorces and separations finalized after 2018 are no longer taxable or deductible.

[DG47]

I'm not paying her alimony, I'm paying her a portion of my retirement? I need to fill out a 1099-R I think? 

Do i need to request the 1099 from the IRS? where do I get the 1099-R and how do I fill it out? 

[Opus 17]

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@DG47 wrote:

I'm not paying her alimony, I'm paying her a portion of my retirement? I need to fill out a 1099-R I think? 

Do i need to request the 1099 from the IRS? where do I get the 1099-R and how do I fill it out? 

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I know what you are talking about and I have seen some discussion here of filing a 1099 to her as nominee income, but I don't remember which expert knew how to do it.  (Some of the experts will say that you don't issue a 1099-R since you aren't a bank or broker, but I believe this situation is an exception, I just don't remember who knows the details.)

@rjs @ee-ea @macuser_22 @Hal_Al  does this ring a bell with you?

It would be much better to get a QDRO from your attorneys so that DFSA will pay your ex directly and issue a separate 1099-R. 

You may be able to issue a 1099-R electronically online.  There are several web sites that will allow you to e-file a 1099-NEC or 1099-MISC for around $5-10 each, but I don't know if they will do a 1099-R.  I don't want to recommend any specific site but you can probably find one by searching the web. 

To issue a 1099-R on paper, you need a special paper form (with carbonless copies) that you must fill out by hand or with a typewriter.  One copy goes to the IRS, one for you to keep, and the rest to the payee.  I think you can get the form from office supply stores, but you probably have to buy a big package.  You can also order forms from the IRS, follow the instructions on page 1 here.

https://www.irs.gov/pub/irs-pdf/f1099r.pdf

https://www.irs.gov/forms-pubs/about-form-1099-r

[Opus 17]

@dmertz  are you familiar with this?

[DG47]

sounds like I need to hire a TAX expert? Not sure if I'm able to do this within TurboTax? 

Any suggestions? 

[DG47]

DFAS won't do it because she was not married to me for over 10 years, therefore it is my responsibility for distribution of funds and issuing her a 1099. 

[Opus 17]

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@DG47 wrote:

sounds like I need to hire a TAX expert? Not sure if I'm able to do this within TurboTax? 

Any suggestions? 

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If you can find someone who knows how to handle this issue, you could pay them to teach you, but you probably wouldn't need to hire them every year.  I'd look for an enrolled agent, that's an accountant who is approved to practice before the IRS.  But maybe one of our other experts will be able to tell you the proper steps. 

[macuser_22]

YOU cannot issue a 1099-R - only registered Financial institutions (or the government)  can issue a 1099-R.   If the 1099-R was issued to you then you are responsible for claiming all of the income on your tax return.  

If there is a court order that splits the retirement benefits then  most plans have terms on how it can be split the benefits incident to divorce so they are paid directly to the ex with their own 1099-R - you never see the money at all.

If you are paying the ex directly then you are out of luck unless you can get the ex to agree to reimburse you for the tax that YOU must pay.

In addition, once you take a distribution then you can do anything you want with the money, including giving it way.    If you give the ex more then $15,000 in the year then you are also required to file a form 709 (gift tax return).

You should talk to your divorce attorney since this should have been part of your divorce decree.

[Opus 17]

@macuser_22 

While I don't remember the advice on how to handle this situation, I don't believe it is correct that the taxpayer must eat the taxes on the entire distribution.

Distribution of assets subject to a divorce is not taxable to the parties.  In the case of a pension or retirement account like an IRA, each party is responsible for tax on their own portion of the income, via a QDRO.  The problem here is that the payer (DFAS) won't honor a QDRO if the parties were married less than 10 years (which I recall to be correct after @DG47 reminded me) which puts the taxpayer in the position where the tax law says one thing but the payer won't issue the correct paperwork.

But I don't remember the correct solution.  

[DG47]

I appreciate the feedback. I just need to connect with the right CPA or expert that can assist with filing and amending my tax returns. I do have some verbiage in the court order that says she is liable for her portion in taxes. I was just hoping I can do it myself in Turbo Tax but don't think the turbotax software can respond or adjust for that type of circumstance. I certainly don't want to make a mistake when filing the amendments cause then it gets more complicated. Looking for a CPA or Military Tax Expert in the area of Miami. Not finding many.

[macuser_22]

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@Opus 17 wrote:

@macuser_22 

While I don't remember the advice on how to handle this situation, I don't believe it is correct that the taxpayer must eat the taxes on the entire distribution.

Distribution of assets subject to a divorce is not taxable to the parties.  

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Exactly what in tax law says that?    I know of no such thing.   The only solution that I know of is an agreement the ex sill reimburse the tax.  I know of no IRS regulation when the person named on the 1099-R can assign the tax to another person.

[Opus 17]

@macuser_22 

IRS publication 504 is quoted below.

I am assuming that there is a QDRO as part of this divorce. Normally, with a QDRO, an IRA or a pension is divided between the spouses and the funds belonging to the ex are placed in an account in the ex’s name and the ex gets their own separate 1099-R for the distributions.

Here, the payer (DFAS) will not separate the accounts and issue a separate 1099R if the spouses were married less than 10 years.  That does not mean that the QDRO does not apply or that the military spouse is required to pay taxes on the full pension benefit.   The QDRO still applies and the taxpayer is only responsible for income tax on the portion of the pension benefit they actually receive.   But lacking the proper paperwork, the question is how should the military spouse report their pension payment so that they only pay tax on the portion that is assigned to them under the QDRO. 

(Of course, if there is no QDRO, the taxpayer needs to get one ASAP, even if DFAS won’t honor it. The taxpayer needs the QDRO to demonstrate the IRS that they do not owe income tax on the full pension.  A QDRO is not necessarily a separate piece of paper, the divorce judgment may qualify on its own depending on state law.)

Qualified Domestic Relations Order

A qualified domestic relations order (QDRO) is a judgment, decree, or court order (including an approved property settlement agreement) issued under a state's domestic relations law that:

• Recognizes someone other than a participant as having a right to receive benefits from a qualified retirement plan (such as most pension and profit-sharing plans) or a tax-sheltered annuity;

• Relates to payment of child support, alimony, or marital property rights to a spouse, former spouse, child, or other dependent of the participant; and

• Specifies certain information, including the amount or part of the participant's benefits to be paid to the participant's spouse, former spouse, child, or other dependent.

Benefits paid to a spouse or former spouse.

Benefits paid under a QDRO to the plan participant's spouse or former spouse must generally be included in the spouse's or former spouse's income. If the participant contributed to the retirement plan, a prorated share of the participant's cost (investment in the contract) is used to figure the taxable amount.