Jim Lorenzen, CFP®, AIF®
On August 14th, the IRS ruled (Revenue Ruling 2019-19) that uncashed distribution checks from qualified retirement plans are taxable.
Oops! That means that those requesting distributions, including RMDs should do it early enough in the calendar year to avoid any year-to-year carry-over confusion. So, a distribution check issued in July, for example, will be taxed for that distribution in the year it is received, even if not cashed or rolled-over.
Those who leave companies and expect future distributions from their 401(k) from that company should update any change of address information – taxes, it appears, will be due on that money even if the check never reaches them.
Why did the IRS make this ruling? According to retirement guru and CPA Ed Slott, the ruling was intended to address a question that has long been faced by retirement plan administrators – what are their withholding and reporting obligations when a check they issued goes uncashed?
So, the distribution is recorded in the year it’s distributed…. Good to know, huh?
Jim
Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and an ACCREDITED INVESTMENT FIDUCIARY® serving private clients since 1991. Jim is Founding Principal of The Independent Financial Group, a registered investment advisor with clients located across the U.S.. He is also licensed for insurance as an independent agent under California license 0C00742. The Independent Financial Group does not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.
