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1099 divorce settlement?
My ex husband contested the original divorce settlement in which I was entitled to 145,000. It went on for 2 years and since the 401k money was with him he wanted the interest during that time. The division of assets had already happened but he was contesting other issues and the 401k interest and we settled for a QDRO giving me 175,000 and me giving him 30,000 in cash so that we wouldn't have to continue to fight in court. My question is that I had to take a loan from my 401k for 20,000 and give him 10,000 in cash. Can I give him a 1099 since it wasn't a division of assets?
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If the QDRO says $175,000, then that's what gets taken from his 401(k) and put into your account. I assume that what happened is you established your own 401(k) for this distribution using his 401(k) plan administrator - as oposed to taking it all in cash - is that correct? If so, then the only way you could withdraw money from your 401(k) without suffering tax consequence is if there was a second QDRO that mandated the $30K distribution back to him. Failing that - I think you have fallen into an unfortunate trap where because you worked a side deal outside the QDRO you are now stuck with the tax consequence. Accordingly be prepared to pay ordinary income tax plus the 10% early withdrawal penalty on the $20K.
I'm curious - did your divorce lawyer discuss the tax consequences of this side deal with you? |
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