1099 R

Forum|Forum|2 years ago
March 15, 2024
1 reply
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I have invested my 401k money in Real estate trust via Custodian. The real estate company bankrupted - Now my custodian keep charging heavy fee for the bankrupted company. I have closed the account so Custodian company sent me 1099 R shows on box 1 and 2a same amount( e.g $100k) however they also checked box 2b taxable amount not determined and put code 1K- if I Do not change amount of 2a I have to pay almost 25k in taxes plus 10% of penalty of the money which I never received - Custodian comapany say once you close the account we can not change and send you new 1099R- How to use this situation so I Do not pay taxes ( almost 35k) on the money which I never received( I received $0)

CatinaT1

Level 15

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jigarshah19Author

Level 2

I am still waiting to find out how to enter correctly to avoid any letter or audit from IRS.

Either I put 0 as a taxable income

Or I put 1099 r as is and then under other miscellaneous income I show -99500 to avoid taxes on money which I never received..

RobertB4444

Level 15

Custodians do have the ability to adjust your 1099-R by filing an amended form. They probably have an internal policy not to. You should tell them that if you don't receive a corrected 1099-R that you will be reporting them to the IRS for fraud.

An investment outside of your retirement account that becomes worthless is a deduction on your tax return as a long term capital loss in the amount that you originally invested. But the custodian company that you are dealing with has reported that they issued you 100 grand that they did not send. That isn't ok. Entering the investment loss will not wipe out that income.

You should plan on mailing in your tax return. You can either leave the 1099-R off of your return entirely (which is a risky move that will probably result in a lot of fun letters from the IRS) or enter an amount in 'Miscellaneous Income' (that's all the way at the bottom of the wages and income section) that is a negative of the amount on the 1099-R so that it wipes out the income. Then, you need to attach form 3949-A to report the 1099-R that you have received. Click here for more information on reporting fraud to the IRS.

If the investment occurred inside your retirement account then there is nothing you can really do about it. If the investment occurred outside your account then you should also enter the investment loss into your tax return as a loss due to bankruptcy. You do that by entering a 1099-B (which you don't have) that reports the amount as a stock sale. The purchase date and amount you paid for it you already know. The sale date is the date that you were certain that the investment became worthless and the sale price is zero. Here is some excellent information on Ponzi schemes to read.

When you send in the 3439-A you should attach copies (never send originals!) of your supporting documentation about the fact that you were never sent money by the custodian. Also, documentation about these fees that they've been charging you for managing a bankrupt company.

[Edited 3/21/24 04:49 PM PST]

@jigarshah19

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