Bird

Honestly, I'd have to either look at how we've done it before. Certainly if we control things (i.e. prepare 1099s) we would not issue a new 1099-R if one was done previously. If it's on a platform and the money has gone back into a participant's account then that proves more difficult. At some point we make it up as we go along and do what seems appropriate given the situation.

Understood. I would not amend a prior return. Maybe call it a rollover...?

Isn't that exactly what was proposed in the PLR request?

If Y is a broker-dealer, then I don't think "access to Y's people" has much significance; it is normal for the B-D to have support staff assisting their brokers. If Y is another broker or similarly situated individual or entity, then the two phrases "...and have access to Y, Inc.'s people" and "No...shared employees" are questionable (potentially inconsistent). Edited to clarify

I think we net them from distributions (i.e. treat them as negative distributions). Not sure what that looks like if the net is negative.

More info from another thread pasted here for clarity, or perhaps confusion. __________________________________________________________________________________ Seems I have a similar situation. Will I owe taxes on the excess distribution described below even if it was never my money? Seems unfair. 1. In April of 2017, I initiated a plan-to-plan rollover of 401K funds from a former employer, which were being held at Prudential Retirements to the 401K plan of my current employer, which are held at Merrill Lynch. 2. The amount of funds transferred directly from Prudential to Merrill was $37,969.60 3. I received confirmation from Prudential that the funds were directly transferred and validated that they were deposited in my 401K account at Merrill. 4. I received a letter from Prudential dated July 31, 2020, that Vodafone made a determination that Vodafone improperly stated my vested interest in the account. As a result, an overpayment of $7,391.14 was rolled over directly to Merrill. 5. Vodafone has requested that Prudential request that I withdraw the funds and related earnings and return them to Prudential. 6. Prudential has already produced revised 1099R forms to reflect the correct rollover eligible for tax deferral and the portion that is in excess. One 1099R is coded "G" the other as "E". 7. My tax preparation software tells me I have to pay taxes on the amount coded "E".

I responded to this in the other thread. Generally not a good idea to post the same thing twice although this one has a bit more info. I will paste your comments here into the other thread and suggest no more replies to this thread.

Did you request the money from Plan B as an excess contribution? You need to find out what code they (Plan B) will report this under. I'm honestly not quite sure how Code E works, but I can tell you that if Plan B intends to report using Code 1 or Code 7 (an early or normal distribution), that it is taxable, and it should not be (since the rollover was effectively disallowed, making it taxable going in).

I was thinking the same thing. I guess we could give the CPA the benefit of the doubt and assume s/he just took over, and/or the client has been doing this on his own but not telling the CPA since it doesn't affect any tax reporting. Give people enough rope and they'll find a way to trip over it, or hang themselves. Shrug.

I don't know about that. I honestly don't know if it is a flag. There are other reasons for not investing in real estate in a plan, starting with 1) valuation - what is it worth, each year? and 2) real estate often involves financing, which can trigger Unrelated Business Taxable Income, and 3) in small plans, owners often blur the lines between the plan and their personal investments, and don't understand that they can't buy/sell from/to themselves or a family member, or invest jointly with same, and otherwise gum things up by paying taxes and other expenses themselves when the plan should be paying, etc. etc. As you note, it is clearly "legal."

Shrug. I just find it offensive that someone can wave a (generally meaningless) piece of paper and the default seems to be that money is owed to them. But I find it equally offensive to say that poor recordkeeping is a reason not to pay a legitimate benefit. Definitely a lot of gray there.

I don't care that much about the semantics. What caught my eye in your original post was "I believe the onus is on the plan sponsor to prove the benefit was settled. Otherwise, they owe her the benefit." And I totally disagree with that. There might be a rare case where I'd advise the sponsor to pay...something (how much?!)...but the SSA letter, in and of itself, is not proof of anything other than someone once reported that money was owed.

Do you have a cite for that? I thought, and apparently everyone else responding, that it was like any other short year - i..e the end of the month.

The deadlines go to the end of the month. From the instructions: Short Years. For a plan year of less than 12 months (short plan year), file the form and applicable schedules by the last day of the 7th calendar month after the short plan year ends or by the extended due date, if filing under an authorized extension of time.

yes When there are liabilities (rarely if ever) - not now.

I'm not asking someone to prove they did not receive a distribution; I'm asking them to prove that they were entitled to something, ever. The SSA letter is not proof of anything other than the fact that someone once reported that they had deferred benefits. A starting point for the participant would be to come up with something corroborating this. What percentage of SSA letters do you think are valid? I'd bet in cases where the sponsor/administrator doesn't already know about a valid claim, it's less than 25%, and seriously doubt it is over 5-10%, if that. Are you saying everyone should start paying benefits based on such lousy odds?

No, we would be asking her to prove she is entitled. I don't believe a letter from SSA saying there might be benefits creates a liability. Would you really, willy-nilly just pay someone based on that? How much?

Without looking it up, I'm pretty sure that if you have a plan of any kind, including a SIMPLE, already, you are not eligible. I think that cross-references to the old law, or rather, the new law only changed the amount but not the rules. All that off the top of my head.

I believe the notice said she might have a benefit. Odds are probably pretty good that she got paid but it wasn't un-reported. I'd probably push back and tell her to prove it. I don't think there is standard operating procedure for this stuff.

Thanks/yes that helps.

As far as the 5500 reporting, it sounds like you have been doing cash basis reporting if you included the 2018 contributions made in 2019 as well as the 2019 contribution made in 2019. That's ok as long as you are consistent. I think the corrective distribution doesn't show up at all if you are filing as a one-man plan. Other questions arise such as whether the distribution, and reporting thereon, was or will be done accurately. (Was the entire $25K not allowed? That would mean $0 compensation.) In our (TPA) world I'd say most or all of us would be doing the tax return as the very last thing, i.e. after calculating contributions, so your question is a bit foreign. Although I think the 5500 reporting would devolve to the same place.

My definition of "consecutive" would be "in a row" but I don't think you can require that, so I agree with your conclusion about when they should come in but suspect the language is a bit "off."

Not to hijack the thread, but can someone explain how it works in a floor-offset? I was asked about it and what was proposed seemed equally un-worthwhile. I'm fortunately at a point where I can shrug my shoulders and say I don't want to bother with it, but am curious.

It's been a while but I don't think there is confirmation. I think the check being cashed or ACH is your confirmation. I guess if there was an error they might contact you but you'd have to try hard to make an error.

I think you are right. I'm not sure it would stop me from doing it as a refund of excess deferral though, as a practical solution. Unless someone can come up with other reporting that makes sense.