How to correct a 1099-R for an erroneous pension distribution

[moneill11]

I am in a difficult situation and have gotten several different answers from CPAs and a non- tax lawyer about my unusual situation. My mom died in 2023. My 3 siblings and I are the beneficiaries of her NYS pension. My sister is the executor of her estate.  In October of 2023, I received a payment of about $6800 with a 10% withholding.  The money was deposited in my bank account. Well, the problem is that NYS local retirement system made a huge mistake:  this check should have gone to my mom's estate.  I was notified in March of 2024.  I returned the money that day and the check cleared on March 22.  The problem is that I cannot get any answers from the retirement system for the past month despite numerous calls/ faxes and a recent letter from the IRS to them.  They have not/ will not re-issue me a corrected 1099-R for 2023.  The 1099  is for $7000, but would be $202 if they did not make this mistake (I received a legitimate check for $202)  They are completely incompetent and have lied to me numerous times.  I have already filed an extension (and have overpaid what I think I owe).  Some CPAs / lawyers have told me to file a 1099-R for the correct amount of $202 and explain why there is a difference.  Some have a concern that the distribution was made in 2023 but returned in 2024.  Had the situation been corrected in 2023, this situation would seemingly be easier.  But if I claim the $7000 for 2023, how is this corrected in 2024 for the money I returned?  As one of the CPAs said "You can't get a 1099-R for a negative amount."  

[Vanessa A]

Technically, you had access and ownership of the money in 2023.  This "technically" means that it should be included on your 2023 return.  However, since the money was paid back, you would then be able to remove it on your 2024 return.  

Since you already paid it back, you can do as one of the CPA's suggested and attached a detailed statement of what happened without including the $7,000 on your return.  Since they withheld the 10% penalty, you will not be able to straighten it out without an explanation.