Where do I enter a gross distribution because of a SEC ruling. I was issued three checks from TFA SCSDI Remediation Fund and don't know where to put it in tax form

[Opus 17]

If I understand correctly, these payments were a result of a mutual fund company charging excess 12.b.1 fees to their investors?  

Were the funds that you got the payments for, part of a tax-advantaged investment like an IRA or 401(k) or were these just regular investments you owned, not part of a tax shelter?

If you owned the funds in a tax-sheltered retirement account, did you deposit the checks in the account or keep the money yourself?

This was reported on a 1099-INT?

[ETMJ]

I did not see an answer to this question. 

In my case, these payments were a result of a mutual fund company charging excess 12.b.1 fees to their investors.

I cashed the checks and kept the funds, did not deposit into the accounts.  Both were from a protected IRA

The check from the Roth acct was below $600, and the one from the rollover was barely below $600.  It was not reported on a 1099-int, since the interest portion of the disbursement were below $600.

No taxes were withheld

How is this treated?  How is this put into TurboTax? 

Thank you

[Opus 17]

Maybe I’m making it more complicated than it needs to be.  To me, the fees should have been rolled over or re-deposited into the IRAs. On the Roth IRA, I think this is technically an early withdrawal. Since you can withdraw Roth money up to the amount of original principle that you contributed without paying any tax, I would think the entire Roth amount is non-taxable as long as it is less than what you originally contributed.  The traditional IRA amount seems to me like it should be reported as an early distribution and you owe income tax on the entire amount plus a 10% early withdrawal penalty.

But, there isn’t any way I can think of to actually report those things properly.  The closest you can come, I think, is to ignore the Roth amount and treat it as a tax free distribution. Report the entire amount from the regular IRA as taxable income. You can report it as “other interest income not reported on a 1099”.    

@dmertz do you have a better idea?

[dmertz]

If these were the result of mutual funds held in an IRA, ideally the checks should have been made payable to the IRA since the IRA was the owner.  However, such payments are sometimes paid to the IRA participant instead and should be deposited into the IRA as a restorative payment or a rollover depending on whether or not they are reported on Form 1099-R as a distribution.

If not deposited into an IRA, the funds are considered to have been distributed from the IRA that owned the mutual funds and should be reported on the tax return as such.  If a Form 1099-R was issued reporting this as a distribution, that Form 1099-R must be entered into TurboTax and you must indicate that you "did something else with the money," i.e., you did not roll it over.  If no Form 1099-R was issued, you would probably need to enter a substitute Form 1099-R (Form 4852) as if you had received a Form 1099-R reporting a regular distribution from the IRA, subject to ordinary income tax and, if you are under age 59½, to a 10% early-distribution penalty on the taxable amount.

[Opus 17]

So, 2 substitute 1099-Rs since there was both a traditional and a Roth IRA?  But the Roth distribution won’t be taxable, in all likelihood, just reported.  

[dmertz]

Generally, as many substitute Forms 1099-R as there were IRA accounts involved.