No social security # for ex spouse alimony payments

[bebop]

I have a client that has alimony payments deducted from his 1099. 1099 says in box 2 (taxable amount)  "UNKNOWN". Taxpayer has been divorced for over 30 years and said there is no way he will be able to get her social security number. I see two options: First is to leave the social security box blank and override the error so I can e-file it.  Second is to just subtract the alimony from box 1 of the 1099 and put the result in box 2 as the taxable amount. Which option do you believe will cause less trouble? Will the IRS allow the deduction if he does not have the social security number?

[bebop]

Just an added note: the amount of the alimony and the name of the recipient is written on the 1099 as a note at the bottom.

[sjrcpa]

Are you sure it is alimony?

Usually this was part of the property settlement and not alimony. For example - ex is to receive 1/3 of former spouse's pension when he starts to receive it. And if it is pension income it should have been done as a QDRO.

[bebop]

That makes sense.  So do I just subtract the amount from the total in box 1 and put the result in box 2 when I enter the data on the 1099 in the program?

[rbynaker]

This smells like a Civil Service Annuity from OPM.

Are you sure the spouse's amount is included in box 1?

[bebop]

I asked the taxpayer because the way the note at the bottom was worded, it almost sounded like it had already been subtracted.  But he assured me he did not receive the amount in box one, that he only received that amount less the amount paid to his ex.

[bebop]

The 1099 is from OPM

[rbynaker]

What about the amount in box 1 minus the health insurance, federal withholding, state withholding (if applicable), LTC insurance, etc.  Divide that by 12 and compare it to how much the client got per month.

(And if this has been going on for 30 years, what does last year's return look like?)

See if your client can find a Notice of Annuity Adjustment (that will show all of the deductions to get you from gross to net).  I usually see two per year, one to adjust the gross for inflation and another to adjust the health insurance amount.

[BobKamman]

When did this start?  Did he just retire?  QDRO's have been around since about 1985, so was he divorced more than 40 years ago?  If it's alimony, it stops when she dies or remarries, how does he know if those conditions haven't been met?  Is this possibly a garnishment, because he wasn't paying alimony, perhaps years ago?  

Is this a disability pension, and has he recovered his cost?  Under the old rules, or the new rules?  Lots of missing information here.  

[bebop]

I don't know how long ago the divorce took place, only that he has an adult son with his current marriage. He did pay alimony many years ago, but she did remarry.  He was a full time serviceman until he had to retire do to a disability of his several years ago.Now he is required to give her a % from his annuity. So technically this is not alimony.  That is all I know.  I have been doing his return all this time, but now I'm questioning whether I have been doing it wrong.  I was just subtracting the amt paid to his ex from the amount in box 1 and putting the result in box 2.

[sjrcpa]

He is SOL. He should have had a QDRO. Without it, he gets taxed on the whole thing, as if nothing went to the ex.

Does he have the property settlement/divorce agreement? Maybe it really is a QDRO and someone dropped the ball on the paperwork. I don't know if it can be fixed retroactively, though.

[rbynaker]

There must be a QDRO.  How else would OPM pay money to the ex-spouse?

I'd bet a shiny nickel--heck, I might even spring for a penny since those must be worth more now that the grocery stores can't seem to find them--that if you do a gross to net calculation you'll match what went into his bank account.

In my experience the "unknown" in these situations is because the OPM computers can't easily calculate the return of contributions (basis) AND allocate it properly between spouses...

I think the longest possible time frame for spreading out the basis is 410 months (~34 years) so if we're not there yet it sounds like we're getting pretty close.

Pub 721 is a good read in your spare time (but it doesn't look like it's been updated for 2025 yet).

I'm getting "Access Denied" errors, which frequently happens to me at night until someone comes in the next morning and fixes it so I can't see if anyone else has replied (and there's a pretty good chance this post might not even go through so I'm going to save a text copy, just in case.)

Rick

[sjrcpa]

@rbynaker Rick,

In my experience, when there is a QDRO each spouse gets a 1099 with their actual share in Box 1. Yes Taxable amount might be unknown.

[BobKamman]

What is a "fulltime serviceman" ?  Was he Civil Service, or military?  QDRO's don't apply to military (paid by DFAS), although they have something similar.  

Or maybe he "bought back" his military time in order to earn more credit for a post-military civilian career.  But at the time of the divorce, he was still military.  Maybe to do that, he had to agree to give the ex a percentage of the new pension that was based on the old one.  

[abctax55]

@BobKamman 

Bingo.  I had one of these, probably 10 years ago. And 'she' was the one sharing her retirement with the ex-hubby.

[BobKamman]

@abctax55 In distant memory:  The ex-spouse would be awarded a percentage of the net check, after deductions.  So the retiree would always make sure as much income tax as possible was withheld from the gross.  Then the ex would still have to pay tax on what she received.