Tuesday Tax Tip – Distribution Checks

The IRS released a ruling that retirement plan distribution checks must be taxed even if the check hasn’t been cashed.

An individual’s failure to cash the distribution check received in 2019 does not permit one to exclude the amount of the designated distribution from gross income for that year under section 402(a) of the Tax Code. If planning to reinvest the distribution to avoid taxation, do it in the same tax period. The tax period is when the distribution is issued, not whether the recipient keeps the check, sends it back, destroys it or cashes the check in a subsequent year.

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