In my mediation agreement it was stated that my ex begin to recieve one half of my Gross pension (which I am collecting now). It also states that she is responsible for all her tax consequences.

Her attorney has drawn up the QDRO which has been submitted to my pension plan, third edit yet to be approved.

Thus QDRO is not yet in effect and my ex is recieving 1/2 my gross of which I am paying all the taxes on right now.

So according to the attorney,they state that when the QDRO is registered and approved and my pension plan makes the equal split and issues separate W2'S tha t I can issue my ex a 1099 form.

This would show that she did not pay taxes on money she recieved from me (which she will have to claim as income) and it will also show I paid too much!

Supposedly Im hoping to get back some taxes.

Is this a correct assumption? Any comments most welcome

Thank you

Under IRC 402(e)(1) payments made to your ex under a QDRO are taxed to her. The question is whether the QDRO will be made retroactive to include all payments she received before the date the QDRO is approved by the plan administrator. If it is retroactive then she will be taxed on the payments received before the QDRO is issued and will receive a 1099 from the plan. I am assuming the QDRO would be retroactive because otherwise she would not be allowed to receive payment of your benefits from the plan. What I dont understand is why the plan is paying her before the QDRO has been approved. The correct procedure is for the plan to withhold 50% of each of your pension payments until the QDRO is approved and then pay her all of the withheld amounts which would be taxed to her.

You cannot issue a 1099 to her.

Good advice.

To expand on this inquiry, if the plan is paying your ex before the QDRO is approved, that is probably not permitted by the plan. If you are paying it directly to ex, pending approval of QDRO, that is not a QDRO payment and you are responsible for the taxes on those amounts.

I am currently paying her the 1/2 gross monthly out of my checking account. the short paragraph in the mediation agreement states she is responsible for any tax consequences... however I am the only one beinng taxed on the entire amount

you are saying that when the qdro takes effect, I cannot issue a 1099 form to her... showing she recieved these monies and that i paid her portion of the taxes? AND that I will not be able to consider her portion of the taxes an overpayment/

i was assuming I would be able to "deduct" her portion of the taxes that i paid for her before the qdro comes into effect.

comments? thanx!

Who instructed you to pay you ex from your pension payments prior to approval of the QDRO? Once the benefits are paid to you you will be taxed on them. The mediation agreement does not determine your taxes. The rules for taxation of QDROs are clear. Your ex is taxed on the amount of the pension benefits paid to her under a QDRO. You are taxed on payments made to you. The only exeption is that you can deduct the payments to your ex from your taxable income if they qualify as alimony or separate maintenance under IRC 71. You will need to check with a tax advisor.

The mediation agreement language only requires that she will be responsible for the taxes on the retirement benefits paid to her.

If you are paying her directly, it might be deductible to you and taxable to her as alimony. That's a question for your accountant.

thats the assumption from their accountant. that when i give her a1099 showing she didnt pay taxes but recieved the money from me. Likewise the 1099 will show that I actually paid all her taxes and in essence I paid too much...

my accountant is double checking as well

regards

keith

There is no easy way to say this, but your accountant should know, off the top of his/her head, that what you are proposing does not work. YOU are going to be paying taxes on every dollar that is paid directly to you by the plan. It will show up as part of YOUR taxable income. Period.

You may then turn around and make a payment or two to your ex and that payment may in fact be deductible. But sometimes deductions don't directly offset income (ask you accountant about that!), so it is best to have the plan pay to your ex anything that is intended to be paid from the plan to your ex.

If it can't be done, it can't be done. But don't delude yourself into thinking that by issuing a 1099 you will be able to avoid the rules on taxation, because you won't.

Hopefully, you don't run into any "gotcha"'s and whatever you pay over to your ex is indeed deductible by you and that the deduction results in a reduction of your taxes which ends up being the equivalent of you never having received the money in the first place. But that is not a given.

Per IRC sec. 71(b), alimony is taxable to the recipient (and hence deductible by the payor), if

Since your payments to your ex are clearly not part of the QDRO, check with your attorney to see if those payments can be considered alimony under your divorce/separation agreement. You know what happens when we assume.