early withdrawl penalty

[Guest skully109]

I filed my tax returns and did not include my early withdrawl form of $10,500, which was sent to me after i had already filed my taxes for the year, what will happen now. I took the money out as a loan and it went into default, and didnt report it? what will happen please help, I though in the letter they sent me that i had to report it at the end of 2006, not 2005

[JanetM]

If I understand you issue, you didn't include the 1099 form or the amount as income? If you forgot to attach the form that is minor detail, if you forgot to include it in income that is big problem. You will have to file an amended tax return to fix this. You should do it before the IRS send you a deficiency letter and applies interest and penalty. Don't forget the 10% penalty if you are under 59.5.

[saabraa]

You haven't provided enough facts for a precise response. It sounds like you received a Form 1099-R that shows $10,500 of taxable income. If the 1099-R says 2006 on it, then it's taxable in 2006, but it's also likely you should look into sending in estimated tax payment(s). See Form 1040 ES for more info on that.

If the 1099 R is for 2005, then you need to amend your 2005 and pay the additional tax. If you don't, you'll eventually receive a notice from IRS that tells you that you owe tax and interest---and possibly penalty.

The letter from the company probably gives a date as of which the "distribution" is deemed or offset. If it was an offset, that is, you simultaneously received the remainder of your account balance (probably because you left that job and became eligible for same), you have 60 days from the date of the offset to rollover any portion of the $10,500 you're willing and able to rollover, thereby avoiding tax and penalty on that portion.

There's no reason to send the 1099-R to IRS if it doesn't show there was withholding of tax.

[david rigby]

You may want a copy of IRS Publication 575: http://www.irs.gov/pub/irs-pdf/p575.pdf

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