Legal Question in Tax Law in Illinois

Re: Tax's penalty for receiving money from Spouse Retirement

A divorce settlement is not governed by the IRS when there is agreement by the parties and it is not contrary to public policy. If the parties or the judge rule that one party or the other is responsible for a payment, or is allowed a deduction, the settlement agreement or order prevails.

The IRS will only step in if there is a dispute between returns (both people take the same deduction or exemption).

I would discuss the ruling with your divorce attorney and ask why the ruling was made in this manner. There must have been some agreement between parties as to the tax liability.

Good luck to you.