1099R should have been treated as a rollover

[sdarave]

My retired client and his former spouse agreed in the divorce to split his several IRA's equally. Judge agreed. Four IRA accounts send a yearly disbursement to a separate IRA which then splits the money evenly to each person. They send a 11099R with normal distribution marked in box 7 to my client. (instead of direct rollover in box7) The problem is the other IRA also sends him a 1099R with box 7 marked for normal distribution. This creates a double tax liability for client.

I feel like I should attach a PDF to his return stating that I entered the four IRA's as a rollover in Box 7. I also have a letter from his account manager stating that the money is deposited directly into the IRA which ultimately splits the money evenly and disburses it to the client and former spouse.

I don't find any precedent anywhere for this type of situation and my discussion with other preparers hasn't shed any light on the subject either.

Thanks for your comments and suggestions!

[Burke]

Reporting this as a rollover should take care of the tax problems. You should not have to do a pdf attachment. Are RMD's involved? Are they satisfied with the second distributions to the TP & ex-spouse? It would seem to me that this whole process could be simplified by combining the 4 IRA's into one, so that only one distribution is made. I also don't understand how the "second IRA" can split the money between two different persons. All IRA's are in individual names. Unless the IRA is in his name, and a distribution is made to the ex-spouse under a QDRO, which appears to be in place.

[taxea]

I would also contact the issuer of the IRA that dispurses to another IRA to determine why this is not considered a rollover before you change the 1099. If it should be a rollover have them correct the 1099 and ask them to issue the 1099 as a rollover in the future if the IRA's are not combined.
Does the ex also get a 1099?

[sdarave]

Reporting this as a rollover should take care of the tax problems. You should not have to do a pdf attachment. Are RMD's involved? Are they satisfied with the second distributions to the TP & ex-spouse? It would seem to me that this whole process could be simplified by combining the 4 IRA's into one, so that only one distribution is made. I also don't understand how the "second IRA" can split the money between two different persons. All IRA's are in individual names. Unless the IRA is in his name, and a distribution is made to the ex-spouse under a QDRO, which appears to be in place.

Thanks for the response. No RMDs, TP not 70 1/2. I'm going to report it as a rollover and try to get TP to change the way this works.

[FEDUKE404]

Splitting the taxable income pie

Thanks for the response. No RMDs, TP not 70 1/2. I'm going to report it as a rollover and try to get TP to change the way this works.

If you report it as a "rolllover" (first person does not pay tax on the amount that was (perhaps) legally rolled over. . . .

. . . .then does the second person have (avoid?) any "income" ??

Sounds like a strange and awkward way to do things. . .why not somehow split the payments from the gitgo, with each party getting his/her appropriate Form 1099-R and moving on? ?

FE

[sdarave]

both the TP and ex spouse receive a 1099R for the total amount disbursed. Only the TP receives the additional four 1099Rs. No one is avoiding any tax. JUst trying to make sure the TP doesn't get taxed twice. And you are correct, this is an awkward way of reporting this. the Retirement planner that set this up should be ashamed!
thanks.