Loan Defaulted. No 1099 Requested!

[Guest TPA Guy]

A person terminated in 2007 and had an outstanding loan. The participant never took a distribution. 90 days later we defaulted the loan in our system but never requested the 1099 at the trust company for the defaulted amount. We just discovered this! What is the proper procedure to fix this? Can we issue it now for 2007 and the participant has to file 3 years of amended tax returns or do we issue it as of 2010??? Any guidance would be greatly appreciated. Thanks

[Tom Poje]

I had this one earlier in the year (loan was - or should have been defaulted in 2008), and called the IRS help line and then was redirected to another IRS help line in regards to the proper filing.

plus I file 1099R electronically, so this was quite enlightening

I am using 2009 1099R software, so as a transmitter I had to check the box 'this is a prior year data'

and then for tax year entered 2008. this actually changed the date on the 1099R form to 2008. magic.

I guess in your case that would 2007. and then the indiviudal need to amend the personal tax form for the year in question

now, how that all works out if you use a paper form, well that didn't register in my mind.

this was the IRS line that provided the final answer

866-455-7438

[Guest TPA Guy]

Thanks! I will call. Since we dont do our own 1099s I guess the trick will be to get the Trust Company to do this for us?

[Tom Poje]

I think the IRS help line can tell you where to get the paper form to fill out, but everything has been in a blur the last month what with ADP testing and document restatements.

[Guest TPA Guy]

I hear ya! thanks

[BG5150]

And do you have to do an amended 1096? Or does it get added to the current year's?

[Guest DVW]

It is also my understanding from Rev. Proc. 2008-50 that, if requested under EPCRS (VCP), the Service will allow you to issue the 1099-R in the year of correction (2010), and not the year of failure (2007).

[K2retire]

It is also my understanding from Rev. Proc. 2008-50 that, if requested under EPCRS (VCP), the Service will allow you to issue the 1099-R in the year of correction (2010), and not the year of failure (2007).

That would make life much easier for the participant receiving it.