It's Inevitable: No Exclusion for Uncashed Distribution Checks

What tax treatment applies when a participant fails to cash a distribution check?  In Rev. Rul. 2019-19, the IRS recently confirmed that the distribution is taxable in the year distributed, whether or not the check is cashed.  Thus, when a distribution is made to an individual and the individual could cash the check, the amount is included in income (provided that no exception to income inclusion applies), subject to withholding, and the distribution must be reported on a 1099-R for the year of distribution.  What’s more, the result is the same whether the individual keeps the check, sends it back, destroys it or cashes it in a later year.  Although this guidance does not address under what circumstances an individual would be considered unable to cash the check, the language of the ruling seems to leave the door open to reach a different result in special circumstances.

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