IRS clarifies tax treatment of Sec. 415 corrective distributions.
The Tax Adviser › Vol. 24 Nbr. 1, January 1993
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Summary
The IRS has resolved the ambiguity over the tax status of corrective distributions from Section 401(k) plans in line with the 1991 ruling making such distributions possible under IRC 415. Under the terms of Revenue Procedure 92-93 dated Oct 29, 1992, such distributions will not be subject to various early distribution or excise taxes. The distribution will reported as income in the year distributed, is subject to withholding and must be reported on a separate Form 1099-R. This ruling becomes effective Jan 1, 1993.
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Extract
IRS clarifies tax treatment of Sec. 415 corrective distributions.
Sec. 415(c) provides limits on the annual additions that can be made on behalf of any participant under a defined contribution plan, such as a profit-sharing plan or a Sec. 401(k) plan. Annual additions, which are comprised of employer contribut...
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