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    401K distributed incorrectly

    An employer had an employee die without any beneficiaries on 401k, a personal rep was appointed by a court. 5 Beneficiaries were found, the court document specifying beneficiaries was provided to the employer. Said employer sent only the first page showing the Personal Rep's name to the financial institution w 401K. They then released the funds in the social security number of the Personal Rep and the 1099-R is in the Rep's name. This is only $50,000 and the Personal Rep had know idea what they should be doing.

    I have called both institutions and neither will budge on changing the 1099-R to the EIN of the Estate. I feel that the Personal Rep could be liable or at minimum not legally following protocol of a Personal Representative if they do not have this taken out of their own name (Beni's could claim they never got their money). It is also not beneficial for one person to suffer the brunt of these taxes as opposed to five. (K-1's). The money has already been distributed to benis and there is little chance of getting any back to help with taxes. I am sure the withholding is not sufficient to cover the taxes. I thought of reporting on the personal reps return and then backing it out to report on estate (1041) return, but don't know how to do this with the withholding.

    Any thoughts on the legal implications for this employer distributing to the wrong person and how to fix this thing?

    Thanks, Lisa

    #2
    Originally posted by lshuling View Post
    . I am sure the withholding is not sufficient to cover the taxes. I thought of reporting on the personal reps return and then backing it out to report on estate (1041) return, but don't know how to do this with the withholding. Any thoughts on the legal implications for this employer distributing to the wrong person and how to fix this thing?

    Thanks, Lisa
    That is what I would do since he/you were unable to resolve with payor. Report on PR's return, inputting the 1099-R as usual, then back it out on Line 21. And show the withholding as tax paid which will show up on Page 2 of his 1040. They have remitted it to the IRS under his SSN so it should be sitting there. That should generate a refund. Hopefully, he does not owe as that would reduce the refund and/or the amount he has to pay. Regardless, the entire amount of the withholding should be paid to the Estate account by the PA once his return is processed.

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