Domestic Diversions

QDROs, taxes and the alternate payee

The IRS imposes a 10% penalty on early distributions from qualified retirement plans. (IRC 72(t)(1)) However, this tax generally does not apply to distributions incident to a divorce and pursuant to a qualified domestic relations order (QDRO). When the former spouse completes a rollover of the award, he or she pays no tax at that time. If the former spouse cashes out the distribution, he or she is taxed as if the distribution were additional income. The plan participant is not taxed in either case. (IRC 402(e)(1)(A))

Talk to your accountant for more and updated information and for specific advice about your tax situation.

2 thoughts on “QDROs, taxes and the alternate payee

  1. Tony Vollmar

    Me and wife just started a divorce proceedings. I have also lost my job and my 401k is froozen. I was told there was a way to un freeze it. I would also like the full amount to go to her. Not sure how long this takes or cost but timing is extremely important.

  2. Tony Vollmar

    Me and wife just started a divorce proceedings. I have also lost my job and my 401k is froozen. I was told there was a way to un freeze it. I would also like the full amount to go to her. Not sure how long this takes or cost but timing is extremely important.

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