irs audit wanting updated 1099 for 2019

[MJ Hartman]

finishing an audit for plan year 2023 the auditors want a corrected 1099r completed for tax year 2019 (showing a taxable distribution of $75000 on behalf of a participant)

is this possible to complete?  I can prepare the 2019 1099r form but cannot complete find a 1096 for 2019.  

does this qualify as an acceptable filing?;  is the participant liable for tax payments on a distribution that was made 7 years ago?

I'm  not sure the irs auditor/supervisor are aware of all tax liabilities since the auditor reminded me that participants unable to be located can have their full balances remitted via 100% withholding tax to the IRS.....

 

[David D]

If you file the 1099-R electronically there is no need for a 1096.  If you are not filing electronically I think you will only be able to get a 2019 1096 by requesting one from the IRS.  Yes, the participant will owe taxes and penalties on the $75,000 (unless they actually reported it). I am certain the auditor is aware of the significant potential liability.

[ReallyChill]

Last I knew, you could not, in fact, just do 100% withholding of an unlocated participant's balance. 30 years ago, we would occasionally recommend this as it seemed to me the best way to ensure that a participant would receive their money, but the IRS then said that didn't work. Legal changes since require either rollover to employer-established IRA (from $1,000 to plan max for mandatory for applicable year, up to $5k or now $7k) or check sent to participant (under-$1,000 mandatory distributions) if the participant doesn't otherwise direct you where to send the distribution. 

As always, these are only my thoughts and not legal advice. 

[RatherBeGolfing]

2 hours ago, ReallyChill said:

Last I knew, you could not, in fact, just do 100% withholding of an unlocated participant's balance.

Agreed