Brokerage won't fix 1099R

[hipstirred]

My retirement plan brokerage in December of 2022 made a surprise nearly lump sum distribution from my 401K account even though I am not required to take distributions until 2028; In raising the issue with them, they acknowledged that the distribution was made in error and they stated they would restore the distributed funds into the account. However, when the funds returned to the original 401K account in January 2023, only the net amount of the distribution was issued back to the account and they stated that the ~20% in tax withholding had to be re-couped by filing taxes; yet they refuse to void or issue an amended 1099-R, so as of now the only 1099-R that was issued to me shows the full distribution as taxable income. Ultimately this leaves me paying >$50k in taxes on income I did not receive for the 2022 tax year. Is the only solution to file Form 4852 as substitute 1099 if they refuse to issue some change to the 1099R? Is there any other recourse? Does this preclude me from e-filing?

[fanfare]

Rollover the withholding into a Traditional IRA

You will have to find your own funds to do that now, or wait for your refund.

You can self-certify that you are eligible for the Rollover past 60 days when

• "The funds are not deposited into a plan or IRA within the 60-day rollover period solely because of an error on the part of the financial institution."

@hipstirred 

[SteamTrain]

@hipstirred 

Since they restored the net amount of the distribution to the account.....and that was also apparently done within 60 days?....you enter the 1099-R as-is.

BUT...you carefully go thru the follow-up questions after the main 1099-R form.  There is one that asks if you rolled over or moved the $$ into another retirement account ...and you indicate that you did  (yeah...it was the same account...but that qualifies too).

Then you indicate the $$ amount that they took back,

The net effect should be that a $$ amount equivalent to Federal and state withholding will be added as taxable income, not the whole distribution.  Then you get full credit for the taxes withheld because you entered those withholding $$ in box 4 (and box 14 for state).  

This should likely result in a fairly good sized refund....The reason the issuer couldn't restore the entire amount, was likely that they had already sent out the withholding $$ to the IRS and State under your SSN.

Yeah, their mistake did jack up your income....but not the full amount of the distribution.

[dmertz]

Getting the portion withheld for taxes back into the plan requires coming up with the funds and rolling them over back into the plan.  Had this been done within 60 days of the distribution, this would be easy.  However, the only way to get the funds back into the account now that the 60-day deadline has passed would be by  getting the plan to accept self-certification under IRS Rev. Proc. 2020-46 (reason 3.02(a), financial institution error, would seem to apply) that these circumstances would qualify for a waiver of the 60-day rollover deadline to allow the rollover to the Roth IRA of the original amount distributed from the designated Roth account in the employer plan:  https://www.irs.gov/pub/irs-drop/rp-20-46.pdf

Once a rollover has  been accomplished, you'll report the distribution as having been rolled over, no change to the Form 1099-R that you received.