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Defining and or Characterizing reporting Income


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I have an issue with a 2004 1099R issued. Code 4, Death Benefits.

The American Postal Workers Union filed a grievance back in 1981, concluded in 1986. 18,000 Survivors were issued funds, labeled under a "delayed roll-over" of COLA, including life insurance. The decedants paid taxes on the delayed prior to his death, under an Annuity Protection.

The arbitrator stated in the settlement 11 times "so no one will be hurt" or "no hurt" or "when the hurt began".

The Eagan accounting section states they do not define or interpret the income. They only report on a 1099R according to IRS rules and regulations. They also state that they have a fiduciary relationship to the Postal Service and only a "conmitant" to the survivors.

In the Post Offices haste, they caused a Mis-characterization by reporting to the IRS. That the "Legal Settlement" was fully taxable.

Does anyone know how this can be resolved? If the Post OFfice can be held liable for the additional taxes owed by the default of "The Offer In Compromise" The previous Federal Tax Lien has been reinstated and are about to take action.

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