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Level 1
March 21, 2021
Question

401 K total distribution used for divorce how to report money given to x

  • March 21, 2021
  • 3 replies
  • 25 views

Client divorced on4/15/2020 took total 401 K distribution of $146521.32 and gave x spouse $85000.  How do I show in Proseries Basis?  I realize there is no penalty but how do I show it on return for the $85000.   

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3 replies

IRonMaN
Level 15
March 21, 2021

You don't if the full distribution was in your client's name.  They have something called QDRO where the spouse gets part of the distribution directly.  If someone's lawyer didn't go that route, your client should find another lawyer for their next divorce.

Slava Ukraini!
abctax55
Level 15
March 21, 2021

AND consider contacting said attorney (if no QDRO done...) to discuss his/her E & O insurance.

HumanKind... Be Both
qbteachmt
Level 15
March 21, 2021

The error happens often in an amicable divorce, where everything goes wrong because of no guidance.

Read this: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-qdro-qualified-domestic-relations-order

 

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