23 August 2019 Distributions from retirement plans are included in gross income in the year paid, regardless of when the check is cashed In Revenue Ruling 2019-19, the IRS confirms that distributions from a qualified retirement plan are included in gross income and subject to federal income tax withholding in the year the distribution is made — regardless of the tax year the recipient cashed the distribution check. The ruling is consistent with the constructive receipt doctrine that considers the date of payment the triggering event for the withholding and reporting requirements. Under the facts in the ruling, the employer and plan administrator of a retirement plan qualified under IRC Section 401(a) make a required distribution to an individual in 2019 and withhold federal income tax as required under IRC Section 3405(d)(2). The individual receives the check in 2019 but does not cash it. The individual also did not make a rollover contribution of any portion of the designated distribution, and no other exception to income inclusion under IRC Section 402(a) applied. Under this fact pattern, the year the individual cashed the distribution check is not relevant. The employer is required to report the distribution on the 2019 Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Further, the employer correctly withheld federal income tax from the amount in 2019.
Document ID: 2019-1519 | |||||||||
