PERS divorce settlement

[PapaTony]

I have a client who received $125K in a cash distribution from her ex-husband's public retirement account (both are below 59 y/o and no roll-over). She had 20% withheld on the 1099. The distribution pushed her AGI to $150K. She has a tax of $28K but only $26K with held so she owes $2,000 still and she's furious (she spent most of the money).

Am I missing something? This is all taxable income to her, correct? She's taking her stuff back to a "divorce settlement" specialist, but I want to learn more.

Thanks.

[Peachie]

Sounds like she's

I have a client who received $125K in a cash distribution from her ex-husband's public retirement account (both are below 59 y/o and no roll-over). She had 20% withheld on the 1099. The distribution pushed her AGI to $150K. She has a tax of $28K but only $26K with held so she owes $2,000 still and she's furious (she spent most of the money).

Am I missing something? This is all taxable income to her, correct? She's taking her stuff back to a "divorce settlement" specialist, but I want to learn more.

Thanks.

trying to make you the guilty party. Who does she expect to pay the taxes? Geesh.

Did you get paid for your work?

Peachie

[snowshine]

yes, she pays tax, but no penalty. Remember to fill out 5329 with code 6. If it's an IRA she does pay penalty.

[PapaTony]

trying to make you the guilty party. Who does she expect to pay the taxes? Geesh.

Did you get paid for your work?

Peachie

That's kind of what I figured. We tried to explain that she should've put it into a retirement account, but she was more interested in new, um, "assets", travel, and a new car.

And as far as payment, I told her we'd refund 1/2 if the other guy gets her out of the additional liability (legitimately, that is).

[PapaTony]

yes, she pays tax, but no penalty. Remember to fill out 5329 with code 6. If it's an IRA she does pay penalty.

Thanks for the reminder!

[taxea]

That's kind of what I figured. We tried to explain that she should've put it into a retirement account, but she was more interested in new, um, "assets", travel, and a new car.

And as far as payment, I told her we'd refund 1/2 if the other guy gets her out of the additional liability (legitimately, that is).

Why the refund...this was clearly her mistake.

[ChEAr$]

That's kind of what I figured. We tried to explain that she should've put it into a retirement account, but she was more interested in new, um, "assets", travel, and a new car.

A rollover from a public retirement system payout into an IRA? Can one do that?

[PapaTony]

Why the refund...this was clearly her mistake.

The refund would only be if we didn't do something correctly and the other preparer was able to legitimately get her a better refund, all other facts remaining the same.

[taxea]

PapaTony...can you verify by personal knowlege that some of the money was spent on uh "assets"

Next thing she is going to ask is whether "they" are a medical deduction.