Revised 1099-R?

[Guest CJErisa]

Participant in a qualified plan took an impermissible in-service withdrawal in 2010 and rolled it over to his IRA. The mistake is noticed in 2012. Participant wants to "undo" the transaction by taking the money out of the IRA and putting it back in the qualified plan. I know we can correct it under VCP, and ask the IRS to not impose the 6% penalty for excess contributions to the IRA or the 10% penalty on early distributions from the qualified plan. Question is, how does this affect the individual's taxes? Do we issue a revised 1099 for 2010 showing the distribution as taxable, which would require the participant to amend his return and include it in income, then deduct the amount repaid in 2012 as a repayment?

Any suggestions (and support for the suggestion) would be greatly appreciated!! (I'm sure this is an obvious answer that I should have found by now, but, I haven't found a whole lot of info on what to do with participants who agree to repay the full amount to the plan)

[ETA Consulting LLC]

The goal of correction is to make the plan as if the mistake never happened. Had the mistake never happened, there would've been no distribution and, therefore, no taxes. So, when you get the funds back in the plan, you'd issue a corrected 1099-R showing there was no distribution taken.

Good Luck!

[Guest CJErisa]

Hmmm... hadn't thought about it that way, but it makes sense. Thanks!!