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CFEPro789
CFEPro789, Accountant
Category: Tax
Satisfied Customers: 538
Experience:  Former IRS Agent, Master of Accountancy, Tax Return Preparer
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i JUST RECEIVED A DIVORCE SETTLEMENT THAT WILL BE PAID IN

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i JUST RECEIVED A DIVORCE SETTLEMENT THAT WILL BE PAID IN ONE LUMP SUM. WILL I HAVE TO DECLARE IT AS INCOME AND PAY TAXES ON IT?

jgdarragh2285 :

Hi my name is XXXXX XXXXX I will be helping you today with your tax question.

jgdarragh2285 :

No you will not, there is no tax on a divorce settlement

jgdarragh2285 :

Only on any annual alimony received

jgdarragh2285 :

The settlement was from assets of your exhusband which he already paid tax on when he earned the income therefore when it is paid out as a divorce settlement it is not taxable.

jgdarragh2285 :

If you receive alimony each year then that is taxable income.

Customer:

THE SETTLEMENT WAS PRIMARILY FROM HIS 401K. DOES THIS CHANGE MY TAX SITUATION?

jgdarragh2285 :

Yes, If he liquidated it on his own and then paid you cash directly then he will be taxed on the 401k distribution. If you take his 401k though and roll it into a 401k of your own that would avoid the tax.

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