Those of you in the realm of Required Minimum Distributions might want to know what happens if you don’t cash the check from your IRA, 401(k) or 403(b), etc., for some reason.
Maybe you’ve just been slow to get to the bank and the check didn’t get deposited until the next tax year. Maybe it was sent back or accidentally stashed in a book in your library or, say, eaten by the dog?
Internal Revenue Service apparently decided non-cashing of distribution checks was a big enough concern to explain. So, the official word (paraphrased) is: For tax purposes, you received it.
The money doesn’t have to land in your bank account or be converted to another form (like a money order) to have been received. It’s the distribution that counts, the IRS says. That means you must declare the payment as income at tax time.
Likewise, the source of the payment, administrator of the retirement plan, also must report the distribution and, if appropriate, withhold any taxes.
“The IRS is very strict about distributions of any kind from a qualified retirement plan,” Eric Buechler, owner of EricJohn Ltd., says. “This is another example of the IRS sticking to the letter of the law.” (For more detail check Revenue Ruling 2019-19 at https://www.irs.gov/pub/irs-drop/rr-19-19.pdf)
Taking the time to plan distributions with a trusted tax professional makes sense, says Eric, who is an enrolled agent certified by the IRS. If you’re wondering about a distribution issue, Eric can help