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RD
RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8784
Experience:  CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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My former employer mis-coded Form 1099R as a direct distribution

Customer Question

My former employer mis-coded Form 1099R as a direct distribution rather than a direct transfer to my new employer (401k proceeds). The IRS has contacted me and asked me to pay taxes and penalties on an amount that never should have been reported to begin with. My former employer is no longer in business (consolidation/merger) and my response to the IRS is due in 2 days (8/4/2010) - what do I do?
Submitted: 6 years ago.
Category: Tax
Expert:  RD replied 6 years ago.
Did you deposit the funds to the new employer's 401K account?
Customer: replied 6 years ago.
yes
Expert:  RD replied 6 years ago.
What year is this related to?

I would suggest you inform the IRS that these funds were rolled over to another qualified plan and if required prepare an amended tax return reporting the same.

Presuming that the funds were directly rolled over or were rolled over within 60 days of receiving the funds, this would resolve your issue.

Funds rolled over to another qualified plan are not subject to tax or penalty.

Let me know if you have any question.

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.

Customer: replied 6 years ago.
what can I provide as "proof" that the funds were transferred and not distributed? I am not able to get a corrected 1099R or 5498?
Expert:  RD replied 6 years ago.
You do not need to send in a proof with the tax return.

To the IRS, you can provide a statement which shows the distribution from one account and a statement which shows deposit in another qualified plan account(from that plan).

Let me know if you have any question.

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.