August 26, 2019

Fred Reish Comments on IRS Ruling on Uncashed Retirement Distribution Checks

Industry publication ThinkAdvisor turned to Fred Reish for commentary on the IRS ruling on uncashed retirement distribution checks. According to the publication, the IRS’s Revenue Ruling 2019-19 warned missing or unresponsive retirement plan participants that uncashed distribution checks from qualified retirement plans are taxable.

According to Reish, the IRS ruling isn’t surprising.

He added that while he’s been “interpreting existing law” to follow the IRS Aug. 14 guidance, “it’s an unfortunate result, but it is, at least in my opinion, the correct application of the law.”

This process, Reish explained, “usually starts with a participant making a request for a distribution. When the distribution is processed, one check is cut to the participant and another to the IRS for required tax withholding. The ‘net’-after tax withholding-check is then mailed to the participant. For unexplainable reasons, the participant doesn’t cash the check and, after six months, the check becomes ‘stale.’”

Meanwhile, though, he continued, “the taxable distribution has been reported to the IRS and the withholding has been paid to the IRS. In theory, at least, that taxable income and the withholding is matched up to the taxpayer and should be matched with a tax return.”

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