1099-R correction

[Pacun]

Client was 55 in September 2010. In October, she got fired and in November pull out all her retirement. She got 4 1099-Rs. To make it simple, 10K, 15K, 5K, 8K. All of them had distribution code 2, except for the bigger one (15K) which had code 1. She had 3 different accounts.

I asked her if she had a loan and she said no. I asked her if she got money before she got fired and she said no. Anyways, we called the issuer and they agree that they should changed the 1099-R to code 2.

Today we got the correction for 25K. I immediately got on the phone with them and asked them to correct ONLY the incorrect 1099-R. They informed me that because it was on the same account, as soon as they changed the code, both of them became one and that's why I was getting it that way. They said that everything was OK, but I insist that there will be a letter from the IRS in about a year.

What do you think? I efiled her taxes today and warn the tax payer but she needs the money badly. She is getting more that 5K. She was smart enough to have money withheld for both state and fed.

[kcjenkins]

Since the IRS computers track by EIN, there is a chance that there will be no problem. If there is a problem, you will just have to wait until they send a notice, and deal with it then. Since the total amount from that EIN did not change, it may not create any problem.

[Cathy]

Taxpayer's refund should not be delayed because of the corrected 1099 (and they did mark it "corrected", I hope). Inasfar

as the letter in a couple of years...don't know but make sure you document the date, time and name of the person with whom you spoke... just in case.

And their reasoning for the two becoming one make sense to me....IRS will notify taxpayer IF it doesn't make sense to them.

Cathy

[jainen]

>>What do you think?<<

I think the company has some inexperienced bookkeepers, but after you complained somebody who knows what they are doing fixed it all. I assume you tell all your clients to immediately bring you any IRS letter. If IRS should ask about this 1099 snafu, you'll be able to explain it with a single phone call.