Withholding Hardship Dist.

[Hoard1]

An employer failed the do the 20% withholding for a harship distribution in 1998. How is this reported to the IRS (945)? Is there a excise tax penalty and how is it reported to the IRS (5330)? I believe that employee will have to amend their 98 return to reflect excise tax due on permature distribution. Any comments or thoughts from those who may have encountered this.

[Alf]

I am not aware of any reporting/excise tax requirements. I always understood that employers who fail to withhold run the risk of being held liable for any taxes attributable to the distribution that the participant fails to pay. I do know that the participant would not need to amend her return. The full amount of the participant's distribution was taxed (regular and penalty) in the year of withdrawal, regardless of whether the participant got 80% or 100% of the distribution.