1099R issued to Plan Sponsor

[thepensionmaven]

Participant terminated, entitled to payout, check was requested from the annuity carrier.  Plan Sponsor receives the 1099-R  showing Plan Sponsor as the recipient, with the gross amount the participant is entitled to, and an amount withheld. The broker must have established the annuity in the company name and not the name of the Plan. I would think the annuity carrier paid the IRS the withholding but under their EIN.

Annuity carrier sends Plan Sponsor a net check, sponsor deposits into their corporate account and pays the participant, cross referencing the whole transaction.

Now participant is calling client complaining she ever received a 1099R, and client  comes to us to prepare.

I believe that since withholding already paid, I would show the net distribution as the  gross and the net amount taxable with $0 withheld?

[Mike Preston]

Seems wrong to me. How would you fill out the 1099 if it was issued by the provider?  Do that on all distribution amounts/withheld amounts.

[Bird]

2 hours ago, thepensionmaven said:

I believe that since withholding already paid, I would show the net distribution as the  gross and the net amount taxable with $0 withheld?

Not that! The purpose of the 1099-R is to tell the IRS how much was distributed, so it can be added to taxable income, and how much was withheld, so that can be credited against the total tax due.  You're making a bad situation worse if you give them completely wrong numbers.

I'd probably report the gross and the amount withheld as it should have been done.  At least the participant would have the correct amounts reported.  I dunno, maybe that constitutes tax fraud so don't take it as advice.  The sponsor might have to try to explain it all at some point.  

An ounce of prevention is worth a pound of cure.  It sounds like nobody was in charge here.

[Lou S.]

Well the "best way" to handle it is to get the carrier to issue corrected 1099-Rs in the name of the participant instead of the company.

[david rigby]

And make sure it does not happen again!