QDRO

[Patrick Michael]

Client was divorced in 2013 and as part of the settlement spouse received part of his pension under a QDRO.  In 2014 spouse went back to court and the had the percentage of the pension subject to the QDRO increased and the judge ordered my client to pay about $5,000 for the pension payment spouse should have received in 2013 and 2014.  Client wrote a check for this in 2015.    Client believes he should be able to deduct this because if the distribution came directly from his pension payment it would have been reported as his wife's income and not his.  I can not find any authority that allows this to be deducted.  Has anyone else come across this.

[jasdlm]

I would say it's property settlement and not deductible.  The QDRO could have been amended or redone.  

[Randall]

Just now, jasdlm said:

I would say it's property settlement and not deductible.  The QDRO could have been amended or redone.  

I don't have any cites off the top of my head.  But I would agree.  Besides, amending might cost him more in legal fees then the tax savings on $5000.  And he has the $5000 in his retirement account to continue at tax deferred earnings.

[kcjenkins]

Randall has it right, and has also provided you good reasons to give the client to ease his pain.  Just don't let the client make you feel any of this is your fault!  If he wants to be mad at someone, his lawyer is the one to be mad at.

[Patrick Michael]

Thanks for the replies, it was pretty much what I was thinking.

[Roberts]

He wrote a check?

Does that mean the pension has already annuitized and he paid that out of his monthly payment from the pension? Or did he pay this instead of changing his future payments?

I think if the pension has already annuitized and payments are being made, it's possible this could be deemed alimony for tax purposes. If that's the case - check with the attorney. If the pension hasn't started making payments - it's a property distribution due to divorce and non-taxable.

[Patrick Michael]

The pension did start to make payments, but the judge ruled the payments were wrong.  Client had to write a check to make up the difference on the past pension payments and future pension payments will be increased the new amount. 

[Roberts]

1 hour ago, Patrick Michael EA said:

The pension did start to make payments, but the judge ruled the payments were wrong.  Client had to write a check to make up the difference on the past pension payments and future pension payments will be increased the new amount. 

I think the client does have a reasonable argument to say this is alimony. If the judge ordered the client to pay after tax income dollars to his ex to recoop her for lost taxable income. That's alimony and she should pay the tax on the income - not him. I think your client has a viable argument.