1099R Reporting for Incorrect Distribution

[Jean]

In error, a participant is sent two distribution checks. He received 2x the amount he should have received. He cashed both checks and refuses to return overpayment.

Employer has already returned the overpayment to the plan.

How should this be reported on 1099R?

[Guest michaelv]

I would say that just because he got an overpayment it does not mean that he gets the extra money tax-free. It should be taxed as any other distribution. So, i would combine the 2 amounts and issue 1 1099-R.

If a cash distribution was made, was the required withholding satisfied for both checks?

[Guest]

1099 is used to report the taxable amount distributed by the plna and received by the participant. Since the calendar year has closed and the individual has not returned the funds, then the 1099 should include the entire amount.

Care to share how much the over distribution was?

[Jean]

Total was > $5,000. Tax withholding was correct, as second check was a repeat of the first.

Thanks for feedback, will issue one 1099R with total amount and distribution code as 1.

[Guest spritcha]

We have always issued the correct distribution amount on a 1099R so it is eligible for rollover. The overpaid amount should not be eligible for rollover and we issue a 1099MISC for that amount.