spousal support paid from retirement

[oakhillsal]

Client divorced prior to 2018.  A portion of his retirement payments is automatically deducted and sent to spouse.  1099R shows full amount of retirement in box 1 and taxable portion in box 2 (slightly less)  but amount actually received is is the remainder AFTER the spousal support/alimony is deducted and forwarded to the spouse.  Two questions arise: 1-is spousal support considered alimony for tax purposes (the IRS articulates alimony and separate maintenance payments, but does not say spousal support)?  IRS section 71(b)(1) defies the term "alimony or separate maintenance payment" to mean any payment in cash if such payment is received by (or on behalf of) a spouse under a divorce or separation instrument.

2- Does the fact that the money is not paid by the taxpayer, but rather is paid by the pension fund on behalf of the taxpayer have any bearing on the deductibility issue.

The IRS does not use the term spousal support, but the aforementioned paragraph seems to incorporate that term by the use of "any payment in cash" for support. 

I would appreciate any comments from anyone who has broached this issue with the IRS or has any documentation that would guide me in determining the deductibility of such funds.

[Just-Lisa-Now-]

Alimony is commonly referred to as spousal support.  https://www.divorcenet.com/states/nationwide/the_seven_alimony_rules

[abctax55]

And some attorney screwed up.... this situation is supposed to be handle via a QDRO.

[BobKamman]

You don't know that.  It could be your typical assignment, as is done with wages.  It might end or be reduced at some future time (as when the kids reach 18, or the spouse finishes school and finds a job).  Just because the last one you saw was a property settlement -- usually, involving military pensions -- doesn't mean the next one will be.  

Don't  be the practitioner who screws it up thinking there should have been a QDRO.  A little knowledge is a dangerous thing.  

[Dusty2]

@abctax55I think I understand what you are saying.  If it is a QDRO it is not alimony or spousal support.  If there is no QDRO then it is alimony or spousal support?

Dusty

[Just-Lisa-Now- · Accepted solution]

If it had been set up as a QDRO, the 1099R would be in the spouses name and her tax responsibility, not his...he had a lousy attorney.

As it stands like this, Id call it alimony/spousal support...whether he actually pays it by taking $$ from his retirement or his savings account, shouldn't matter.

[BobKamman]

Why are you fixated on QDRO? This is the typical run-of-the-mill garnishment.  If the guy were still employed, his employer would get the court order to withhold a certain amount until further notice.  The W-2 would still show all the wages he earned.  Since he's retired, the pension trustee gets the order.  If he were unemployed and too young for a pension, it's his bank that would get the levy notice.  

QDRO is a property-settlement tool, not a collection tool.  Good lawyers, and competent tax practitioners, know that.  

[oakhillsal]

As it turns out from additional documentation from the client, it WAS a DRO sent to the pension payer and not a QDRO.  I appreciate all of you taking time to answer my question.  The receiving spouse may not be so happy when she gets a bill or notice for the $22,000 she received and probably didn't report.  Now, about those 1040Xs for prior years where it was not claimed.........Hmmmmmm.

Again, thanks folks.

[BobKamman]

"Spousal support" is the term used in Utah although apparently the law itself still uses "alimony."  One interesting provision is

"The court may not order alimony for a duration longer than the number of years that the marriage existed unless, at any time before termination of alimony, the court finds extenuating circumstances that justify the payment of alimony for a longer period of time."  (Utah Code Section 30-3-5)  

Spousal support can be modified.  A property settlement, which is what a QDRO involves, cannot be.  Your client can go back to court and ask for the payments to be lowered, if he can show changed circumstances (or that his ex has remarried).  Likewise, the ex can go back to court and ask for more money.  It's just another run-of-the-mill divorce, with no need for a QDRO.