Too much withholding

Participant had 20% withheld on full distribution.  However - part of the distribution was for Roth money which was not taken into account and the full distribution was treated as pre-tax money.  Need to issue amended 1099-R.  Original withholding was done for $5,000 but upon revision the withholding should only have been $3,000.  When issuing the amended 1099-R how do you show the withholding amount - what it actually was or what it should have been?  Also - what is best way to get the over withholding back?

10 minutes ago, Becky Schwing said:

Participant had 20% withheld on full distribution.

Full distribution, meaning a total distribution of the participant's account? I assume the 5,000 and 3,000 numbers are rounded off?

11 minutes ago, Becky Schwing said:

Need to issue amended 1099-R

The distribution was in 2018? Has the participant filed their 2018 tax return yet? If so they will need to file an amended return.

12 minutes ago, Becky Schwing said:

what it actually was or what it should have been?

Report what was actually withheld. Since there will be 2 forms, I would report the full amount of the withholding on the form with the code 7 and 0 withholding on the form with code B.

17 minutes ago, Becky Schwing said:

what is best way to get the over withholding back?

When the participant files (or amends) their tax return, they will get a refund of any excess amounts that were remitted to the IRS.

I guess I am confused. 

If this was in 2018 and the person has filed their taxes haven't they gotten credit for the withheld amount already?  Why fix it if that is true?   It seems too late to roll the Roth money to a Roth IRA it seems.  That would seem like why a person would be upset they had taxes withheld and couldn't roll it to a Roth IRA.  

If this payment happened in 2019 are you saying the 1099-R was issued already and needs to be fixed?  if not, just show the actual withholding. 

I am unclear what the problem is.  

You withheld too much, simply report what you withheld and move on. As ESOP guy says it all came out in the wash when they did their taxes. Unless you are recoveing the the extra $2000 in taxes that was sent to to the IRS and sending it to the participant.

Yeah, I don't know it is so c'est la vie.  The individual was entitled to receive his account balance minus $3,000 for w/h, not minus $5,000 for withholding, so he had $2,000 less to roll over if he intended to roll over.  It is especially nuanced since there is Roth money involved.      

33 minutes ago, jpod said:

Yeah, I don't know it is so c'est la vie.  The individual was entitled to receive his account balance minus $3,000 for w/h, not minus $5,000 for withholding, so he had $2,000 less to roll over if he intended to roll over.  It is especially nuanced since there is Roth money involved.      

If it was 2018 - then I don't think there is any thing to correct.

If it is 2019 - then the plan should send him the additional $2000 and recover the $2000 withholding from the feds. That may or may not be practical or easy.

16 hours ago, Lou S. said:

That may or may not be practical or easy.

Its actually not that difficult.  I think people just assume it is because its the IRS

I think probably for IRS there is nothing to do but move on and effectively treat the overwithholding as advance payment of tax, as stated above, which you credit on 1040. But as jpod points out, it does seem like the participant was put in a bad place, since did not have the funds to rollover, or may not have understand how to fix immediately. Perhaps the IRS would exercise waiver authority for the 60-day rollover period, or look to fiduciary who potentially made error to compensate. Just commenting on hypothetical fact situation.