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Divorce settlement 1099?
My husband cashed out his retirement account to give to his ex wife in a divorce settlement. As a result he received a big tax bill. He has been advised that he can 1099 her (she lives in England) since the money was paid to her? Is that correct?
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If the transfer of the 401(k) or IRA to the ex-wife was driven by a Qualified Domestic Reations Order (QDRO), then it's a non-taxable event to your husband. The plan administrator can handle this directly. However, if there was no QDRO, and especially if your husband took a withdrawal, then the bad news is that your husband now has a huge tax bill, which may include a 10% early withdrawal penalty. He can not simply palm that tax bill off on his ex. His attorney (he had one, right?) should have advised him of the complications here. See: Splitting the Retirement Accounts - Personal Finance - Marriage & Divorce - SmartMoney.com |
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