Q. After 20 years of marriage, my wife and I have decided to divorce. Both of us became civil servants after our marriage and have TSP accounts. The settlement that we agreed upon has me paying her roughly $100,000 from my TSP account to her TSP account. In researching how to achieve this, I have only found direction on what the court order contains and the process the TSP takes to execute the court order. The brochure explaining this also states: “The party who must pay Federal income tax on the distribution will receive tax reporting and withholding information from the TSP.” If these funds are going from one TSP account to another TSP account, will those funds be taxed and will the TSP receive a lump-sum payment into her account?
A. This is a question for a tax accountant and I can’t speak for the IRS, but I can tell you that the TSP’s rules seem to make it impossible to take pretax money from your account and deposit it as post-tax money to her account. In other words, I don’t think it’s possible to transfer the funds and incur tax on a distribution of pretax funds at the same time.
