@pchicke yes, she can get it back.... two options
1) contact the life insurance company and see if they will re-issue. the problem is they sent the withholdings to the IRS and NY already, so they may not
2) alternatively, each of the 4 sisters create a dummy 1099-R for their respective tax returns. Each will report 1/4 of Box 1 and 2a. I am assuming each sister is entited to 1/4 of the proceeds. Each sister will report their share to their respective states and to the IRS.
3) for box 4 and 14, the sister whose SSN is on the 1099-R needs to report this in its entirety on her tax return. This sister sends 1/4 of box 4 and 1/4 of box 14 to each of her three other sisters; she just sends each a check.
4) This way each of the 4 sisters is reporting their fair share of income on their respective federal and state tax return. Yes, three of the sisters may owe federal and state, but they have the check from the 4th sister to cover it. The 4th sister would get a large refund from both federal and NY which is how she is able to pay the other three sisters.
5) if the one sister ever gets audited by the IRS or NY State, she just explains what occured and that the other three sisters reported on their respective income tax returns. It's messy, but it should all work out. No one is underreporting income.
6) it could be the insurance company is willing to create 4 1099-R's and correct the reporting on Box 1 and 2a, but can't adjust the reporting on Box 4 and 14. As long as they put the contents of Box 4 and 14 on the 4th sister's 1099-R, and y'all follow the steps above, it'll still work out. I'd suggest this to the insurance company as it's the most elegant way to solve this problem.
7) I wrote all that assuming the code in Box 7 (which you didn't post) aligns with what I wrote. WHAT IS IN BOX 7 - probably won't change what I wrote, but would be good to know
does that make sense?
