Is it an IRA distribution?

[jklcpa]

Client received little checks in settlement for an action SEC brought against 2 funds or managers that created losses and fees to excessive trading activities. In big bold letters attached to a check client receives it says "if this payment is related to an IRA, retirement account...DO NOT CASH OR DEPOSIT INTO A NON-TAX DEFERRED ACCOUNT."  Also has the standard wording about consulting a tax advisor.   So we all know what happened, right?

 

Well, first thing is that the client forgot about the one little check that was dated in 2013 and made payable to her IRA rollover account, so in 2014 she wrote and asked for that old check to be voided and had a new one issued.  Of course, then she cashed the check in 2014 and took the money.

 

She got another similar check in 2014 related to another fund, also related to an IRA rollover account she had, and she cashed that one too. 

 

Letter says these aren't reported to the IRS, but isn't it technically like a distribution since she cashed the checks?   How am I supposed to report these two tiny amounts?  She is also under 59 1/2. 

 

I am just because this is a very simple return that should have taken me about 20 minutes tops, husband earns $300-400K, and these are stupid little amounts.

[Margaret CPA in OH]

I would be inclined to report as an early distribution but not sure how to input absent a 1099R. There would be no matching but maybe an easier conscience and good documentation of the what happened.

Boy, we really get the weird ones on this board, don't we?

[jklcpa]

I just checked, and Drake has a general input area that does include lines for and IRA distribution, the taxable amount, and a check box to calc the penalty.  I've only used that area a couple of times and I'm surprised to see those lines there.  That's a relief!  Onward...