IRS Ruling on Uncashed Retirement Distribution Checks Leaves Unanswered Questions
August 27, 2019 by Melanie Waddell
The Internal Revenue Service recently warned missing or unresponsive retirement plan participants that uncashed distribution checks from qualified retirement plans are taxable.
Revenue Ruling 2019-19, issued on Aug. 14, applies to a participant who receives, but neither cashes nor rolls over, a distribution check.
“Because Internal Revenue Code Section 402(a) provides that any amount actually distributed from a qualified retirement plan is taxed under Section 72 in the year distributed (subject to the rollover rules), the ruling holds that the participant is taxed on the distribution check in the year she receives it, even if she does not cash it,” Eversheds Sutherland attorneys explained in a recent alert.
The IRS held in its ruling that a mandatory distribution from a qualified plan “that is sent in one year, received in that year but not cashed in that year, is nevertheless taxable to the recipient in 2019 and subject to withholding and reporting by the payor,” added Barry Klein, an attorney at Stradley Ronon’s Philadelphia office.