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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22692
Experience:  Taxes, Immigration, Labor Relations
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If I receive moneys that have been in a retirement plan, then

Resolved Question:

If I receive moneys that have been in a retirement plan, then disbursed to me via QUADRO (due to divorce), and take the funds instead of rolling them over, what are the penalty and tax consequences? Is there an exception if the funds are used to purchase a home?
Submitted: 3 years ago.
Category: Tax
Expert:  Lev replied 3 years ago.

LEV :

Hi and welcome to Just Answer!
What type of retirement plan you have?

Customer:

This is from my ex-husbands retirement plan. One is a 401(k) Pension Plan the other is The Retirement Security Plan.

Customer:

This is from my ex-husbands retirment plans. One is a 401(k) Pension Plan, the other is The Retirement Security Plan.

LEV :

 


For distributions from 401(k) Pension Plan - if distributions are made to an alternate payee under a qualified domestic relations order (QUADRO) - such distributions are not subject of early distribution penalty.
See for reference IRS publication 575 - page 31 - http://www.irs.gov/pub/irs-pdf/p575.pdf - Additional exceptions for qualified retirement plans.
For the Retirement Security Plan - you need to contact the administrator and verify if that is a qualified retirement plans - if yes - the same exemption may be used.

Customer:

What if the funds are used to purchase a home? Would I still have to declare as income and pay taxes, and if so at what rate?

Customer:

Did you receive my second response?

LEV :

Regardless how funds are used - as long as you take distribution - that will be your taxable income.
Your tax rate depends on your total income, filing status, dependents, other deductions, etc.
The tax rate may be from zero to 35% - see last page in this publication - http://www.irs.gov/pub/irs-pdf/i1040tt.pdf
Let me know if you need help with estimations.

Customer:

Thank you Lev.....I would like help with distribution of two amounts. If I take the full amount from both plans, it would total $211,952.01. I may just take one amount of $39,755.39. As far as additional income for this year, would probably only be an additional $5K if even that. Can you help me with tax estimates on the two amounts? I am 58, divorced and both my children are married. Thanks so much.

LEV :

So far, you will file your tax return as Single, no dependents, assuming standard deduction:
with total income $5000 + $39,755 (taxable distribution) = $44,755 - your estimated federal income tax liability would be $4650
with total income $5000 + $211,952(taxable distribution) = $216,952 - your estimated federal income tax liability would be $53,600.

Customer:

Thank you so very much Lev....this has been very helpful to me in making some important decisions. Your service has been greatly appreciated!

LEV :

You are welcome. I am glad to be helpful.

Customer:

To save this information for my review, please assist me how to forward to my email, or do I need to access via your website? I just want to have access to this information at any time. Thanks

LEV :

Here is a link to this page - http://www.justanswer.com/tax/52tnz-receive-moneys-retirement-plan.html
Please bookmark it - and you will be able to come back any time for reference or to ask additional questions.
I do not have control over emailing content and do not have access to personal information (email, etc).

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22692
Experience: Taxes, Immigration, Labor Relations
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