1099-R Fed w/h exact same amt of State w/h...

[AZ-Tax]

What are the chances of the Fed income tax witholding amt to be the exact down to the penny as the state income tax witholding? If the TP is going to need a corrected 1099-R, will that delay filing both the TP's Fed and State income tax returns or just State? Never experience this before.

[JohnH]

It can happen if the client asks the trustee to withhold the same percentage for both Fed and state, either intentionally or by accident. Do the withholdings work out to an exact percentage of the distribution? You can always verify the totals by asking the client how much they received net each month, quarter, etc - it's pretty easy if they have an entire year of distributions with no changes during the year.

[S T]

My guess

Odds are slim and none, but it is possible, and if I think back, I probably have seen and processed one or two of them.

Anyway do you have access to the State for the t/p's account to see what the withholding reporting is? I think we can do this in California.

Otherwise, alert client that it might be an error, file the return based on the info and the State will certainly issue a correction notice.

Sandy

[erchess]

My Notions

If there is an error, who is to say which (Federal or State) is wrong or for that matter who is to say that either is correct?

As for the possibility of correction, if the 1099R was produced by a computer, do the odds not approach certainty that the same figures were sent to the taxpayer and the taxing agencies? So why would a correction from either of them be expected even if we assume that error exists?

The place to start as JohnH indicated is with the information you have. If the numbers work out to an even percentage of the gross, that supports the idea that the form is accurate. So does the client's testimony that he got the same amount net each month or quarter and the math works out between that testimony and the Form. I think that if I did not have at least one of these features supporting the hypothesis that the form is accurate I would prepare a letter of inquiry perhaps from both the taxpayer and myself asking for the records to back it up. They will comply more readily than the school board in another thread about a W2 because they are not being asked to change anything they did but only to prove that the check stubs add up to the Form. One very low level employee will spend ten minutes complying with the request.

If the taxpayer is really impatient and does not want to wait on correspondence with the issuer then I would prepare and ask him to sign a statement that his Federal and State withholding were in question and that there could be either delays in processing his refund or future correspondence leading to the payment of additional tax penalty and interest. I would state clearly what I currently charge for helping with letters like that and that he would be on the hook both for the amounts owed the taxing agencies and my fees if he wanted my help. I would include the fact that anything he should get from either taxing agency or the issuer of the 1099R should be brought to me within one week of receipt because of my busy schedule.

[Burke]

What are the chances of the Fed income tax witholding amt to be the exact down to the penny as the state income tax witholding? If the TP is going to need a corrected 1099-R, will that delay filing both the TP's Fed and State income tax returns or just State? Never experience this before.

It can happen. Just had one. TP just put flat amount on the paperwork for both fed and state and custodian followed his instructions.