IRS Releases Guidance on Failure to Cash Distribution Checks, September 5, 2019

The IRS has released guidance providing that when a check for a fully taxable distribution from a qualified plan is mailed to a plan participant, but not cashed, it is considered to have been "actually distributed" from the plan and is taxable to the participant in the year of distribution. Further, the failure to cash the check did not change the plan administrator's withholding obligations with respect to the distribution and did not change the obligation to report the distribution on Form 1099-R (assuming the distribution exceeds the applicable reporting threshold). Despite these findings, the IRS was careful to note that it continues to consider the issue of uncashed distribution checks in situations involving missing participants. For more information on the withholding requirements that may apply to qualified plan distributions, visit Tax Facts Online.