Late Loan Default

[Guest KMP]

I have a client who forgot to default a loan during 2008. They discovered this and want to know how to correct. Can they issue the 1099R in 2009 showing the correct amount of the loan default, or do they have to do a late 2008 1099R and have the participant revise his tax return for last year?

[Guest Sieve]

I believe you will either have to issue and file an 1099-R for 2008, or else go in under VCP (if the cause of the default was administrative error) and ask that the 1099-R be issued in the current year (if the 5-yr. maximum payback period has expired and re-amortization no longer is an option). (See EPCRS, Section 6.07.)

[Tom Poje]

you learn something new every day.

having this situation arise at this late date - of course a takeover case.

called the IRS help line, started with one office, and redirected to another. (Despite 2 different phone calls, no waiting, very helpful people - so much for ugly rumors)

(This of course involves not going through VCP)

anyway, my ultimate question boiled down to how do I do this if I file 1099s electronically?

so, you use the 2009 software, not the 2008 software.

there is a spot to code the form 'prior year filing'

another spot where you enter "2008" to indicate the proper year

the system then generates a paper copy 1099R with the year 2008 (rather than 2009) in the upper right hand box of the form.

the electronic file (nothing at all to do with the printed 1099) to be sent to the IRS contains the letter "P" in field 6.

"P" I guess must indicate prior year.

well, ok, maybe I got lucky and the particular software I used had the proper features, though I would assume all of them would since they have to be approved ahead of time.

the individual needs to amend their 2008 tax form.

the IRS official did mention there may be a late fee assessed, but not necessarily.

If I recall the particular dept was IRS Forms and Reporting (I could be wrong about that name)

the help line phone number for this dept was 866-455-7438