vkapella

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".

Related issue. Curious as to how to document this properly for the IRS: 1. In 2017, I close a 401K account with Plan A and do a direct (trustee to trustee rollover) to 401K Plan B 2. In 2020, receive letter from Plan A that Plan A employer miscalculated vesting and an thus a portion of the rollover was ineligible. This was an employer contribution that was improperly vested. a. Plan A directed me to withdraw the amount of the overpayment + applicable earnings from Plan B b. Plan A directed me to return the overpayment amount + applicable earnings 3. Plan B cuts me a check for the overpayment + applicable earnings - claims it cannot cut a check directly to Plan A 4. Plan A has issued revised 1099Rs for TY2017 - one for the correct rollover amount with code G and one for the overpayment (incorrect vesting) with Code E Questions: A. Is there any reason I should NOT deposit the check from Plan B and issue a cashier's check to Plan A to return the overpayment + earnings? Should Plan B have cut a check directly to Plan A? B. Will I have an IRS liability in 2017 or 2020 if I return the money to Plan A? C. How do I document this so it is clear to the IRS?