Corrected 1099-R

[Susan S.]

A participant received a lump sum distribution from a pooled profit sharing account in July 2010. Federal withholding was sent to the IRS. He received a 2010 1099-R Form reflecting the distribution and the withholding. The participant never cashed his check, so 6 months later (January 2011) the investment company staledated it and put the money back in the pooled account. The employer just brought this to my attention. I need to issue a corrected 1099-R for 2010. Do I enter the gross distribution and taxable amount as zero, then show the withholding? This is going to look really strange, but I don't know any other way to do it. Also, do I enter a distribution code?

Thanks,

Susan

[ESOP Guy]

I guess I don't understand. If the check was for the gross - withholding why wouldn't the gross, taxable, and withholding all be the same?

example:

first time

dist was gross 10,000, withholding 2,000 net 8,000

1099-R was gross 10,000 taxable 10,000 withholding 2,000

now

dist is gross 2,000, withholding 2,000 net 0

1099-R is gross 2,000 taxable is 2,000 withholding 2,000

By the way I am not taking the position that you should even be doing a new 1099-R. I think a case can be made if they guy had the check and could have cashed it he had constructive receipt of the money and it was taxable in the year he got the check. If he gets a new check it is now not taxable it is just a replacement check. I will let others debate that idea if interested.

edit minor typos

[Bird]

By the way I am not taking the position that you should even be doing a new 1099-R. I think a case can be made if they guy had the check and could have cashed it he had constructive receipt of the money and it was taxable in the year he got the check. If he gets a new check it is now not taxable it is just a replacement check. I will let others debate that idea if interested.

That's my thinking as well. Just issue a new check and move on.

[Bill Presson]

We would not issue a revised 1099. He had the money and just chose to do nothing with it.

Also, we would charge additional fees for reissuing the check.