1099R and Code P

[Guest dave1957]

I have a person who is a highly compensated employee and failed

the discrimination testing for 2005. He received a 2006-R for this.

The 2006 1099-R has gross and taxable amounts of $1,934.39. The code is

P (excess contributions plus earnings/excess deferrals taxable in 2005.

I was told by the company's controller that this amount is reportable is and taxable in 2006.

However, I thought that if the distribution was made before 3/15/06, it gets

reported on a 2006 1099-R but is taxable in 2005. Isn't that the meaning of Code P?

So the only thing I could thing of is that the distribution was made after

3/15/2006, plan year is calander year, and the distribution is taxable in 2006,

despite the code P showing up in Box 7.

So I guess my main concern is the Code P, referring to 2005. If it's taxable in

2006, shouldn't box 7 be blank? Would the IRS be looking for this on 2005's return.

Can some explain if I am on the right track for this?

Thanks

David

[Jim Chad]

Need clarification: "I have a person who "

What is your direction for approaching this? Are you in the Human Resources department? Are you a tax preparer? Are you involved in the investements or administration for this Plan?

[Guest dave1957]

I am the preparer preparing the 2006 return.

[Jim Chad]

A copy of that 1099 has probably been sent to the IRS by now. So they will be looking for that on the 05 return. The company's controller is telling you that whoever prepared the 1099 did it wrong. I would not take his word for it. I would ask him to call the Plan administrator for a corrected 1099.

FWIW My experience has been that the administrator is probably the one that is right. But it is worth double checking.

[Disco Stu]

The deadline for electronic filing of 1099Rs is 4/2/07, so it's possible that this form hasn't been filed yet. I agree with Jim though. Chances are that the 1099R preparer is correct and that the controller misunderstands the rule. It's worth finding out for sure though.