I'm trying to prepare for taxes this year and am so confused. I'm hoping someone can point me in the right direction.
I divorced recently and received about 25K from my ex-husband's retirement in cash. How do I document that on my tax return? It's not income...but what is it?
I also cashed in about 3K in savings bonds so I could afford a down payment to buy my house...again...how do I report that, I am sure it is taxed, but I don't really understand where to put this info.
If further background is needed, I file head of household with 2 dependents, will probably itemize this year since I bought a house in April. I have one source of income---my full time job, no investments, nothing else weird. I guess I'm really afraid a big chunk of that 25K is going to be taken away in taxes, since I had no other choice but to take the money in cash at the time.
Thanks so much for your help!
livesoft wrote:You may owe not only taxes, but also a $2500 penalty for cashing in the $25,000 instead of putting it into an IRA if you are younger than age 59.5.
It depends on the meaning of the word "from" (see John's question). If it was a settlement from the ex ("I will pay you $25k cash if you leave my retirement alone"), then no.
When a divorce settlement shifts property from one spouse to another, the recipient doesn't pay tax on that transfer.
If a payment qualifies as alimony under federal tax rules, the paying spouse deducts it and the receiving spouse reports it as income. If a payment is child support, it is not deductible by the payor and is not taxable income to the payee. If a payment is property settlement, there is no immediate tax consequence on the payment. If the payment isn't money, though, there may be a capital gains tax later when the property is sold.
You should get a 1099 for the interest you earned on your savings bonds. What kind of bonds were these and how long have you have them? We may be able to estimate how much of those bonds was actually interest.
The retirement money came from his retirement account through the city he worked for. It was not an IRA, it may have been a 401K. He took the tax penalty when he cashed out the money and then just gave me a check from his personal bank account. I received it in July 2012, it was about 25K, I used some for a down payment on my house, some to pay off my car loan and I saved about 10K.
"It depends on the meaning of the word "from" (see John's question). If it was a settlement from the ex ("I will pay you $25k cash if you leave my retirement alone"), then no.
When a divorce settlement shifts property from one spouse to another, the recipient doesn't pay tax on that transfer."
The situation with the retirement was that the lawyers looked at both our retirment accounts, added them together, and divided them equally...so my part to equal it out was 25K. I am not trying to get out of paying taxes if I do, indeed, owe them...I just don't want to assume I don't need to pay them and find out years later---with penalties that I owe a lot of money!
I didn't receive a 1099-int from the bank the day I cashed those bonds in....I assumed I would get it that day, so maybe that will be mailed to me in the next month or so...not sure.
Thanks again for your help!
Who is online
Users browsing this forum: Abe, athan, AZMax, Blueskies123, danwhite77, Epsilon Delta, Google [Bot], guitarguy, inthearena, JDCarpenter, misterno, Mitchell777, mongstradamus, niceguy7376, rightdecisions, standupguy, summit, SuperGrafx, tandem, tcassette, TheRightKost87, whodidntante, Yahoo [Bot] and 88 guests