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If my ex wife uses money from a deferred comp account by a…

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If my ex wife uses...
If my ex wife uses money from a deferred comp account by a QDRO to pay IRS back taxes, will income taxes have to be paid on that money and by who? Also, how will the IRS know money was taken from the deferred comp account other than being reported on our taxes?
Submitted: 8 months ago.Category: Tax
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9/27/2017
Tax Professional: Stephen G., Sr Income Tax Expert replied 8 months ago
Stephen G.
Stephen G., Sr Income Tax Expert
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Hello, my name is***** goal is to give you a complete & accurate answer. I am working on your request now & I will respond as soon as possible.

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Tax Professional: Stephen G., Sr Income Tax Expert replied 8 months ago

If your ex-wife makes withdrawals from the QDRO set up from a Deferred Compensation fund, she would be responsible for ordinary income taxes on the withdrawals.

The Custodian of the funds is required to report the withdrawals to the IRS via a 1099 a copy of which would also be furnished to your ex-wife and she would be required to report the income on her tax return for the year of withdrawal.

Let me know if you have follow-up questions.

Please remember to rate my response.

Thanks very much,

Steve G.

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Customer reply replied 8 months ago
She pays taxes even if the money was taken by judgement and given to the irs? Is there a way I can have the IRS go into the account and take it out directly?
Tax Professional: Stephen G., Sr Income Tax Expert replied 8 months ago

You didn't mention that before.

This becomes complicated and as far as I can determine, it hasn't been finally determined.

The question turns on whether the funds were extracted directly by the IRS in accordance with a lien where the beneficiary had the immediate right to the funds.

It also matters what the nature of the back taxes consist of; was it as joint liability or was it a separate liability.

So the money would have to be extracted directly from the account by the IRS to be able to have the chance to avoid income taxes.

Steve G.

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