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Cash out for terminated employee

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Participant terminated employment in 2022.

Employer did not make the 2022 contribution until 9/2023 (terminated participant did not receive her contribution)

I revised the 2022 valuation to include terminated participants share of the 2022 contribution, plus share of 2023 earnings.

It is now 2024, participant wants a cash distribution.

I understand that 20% must be withheld from distribution.

Do I use 2023 945 to forward taxes to IRS or wait for the 2024 forms. Is it too late to do 2023 1099R?

Or is there another way to handle this situation.

Thank you for your help


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Agree with Bri - unless you have a time machine, the distribution due to termination is taxable for the year in which the distribution ( not the termination or accrual) occurs. Cash basis reporting. 

Also - why is a paper Form 945 being used at all? why not use eftps.gov to remit the 945 withholding?


I'm a stranger on the internet. Nothing I write is tax or legal advice. 

I'd like a witty saying here, but I don't have any. When in doubt, what does the plan document say?

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Just to close the circle, one hopes that the Plan Administrator offered this participant the ability to have a Direct Rollover distribution, without assuming the payment should be cash.  Written offer, written response.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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