A. IRS' ruling (2019-19) was addressed primarily to the plan administrators for company retirement plans who wanted clarification on when uncashed checks should be considered distributions.
The IRS ruled that a payment from a 401(a) tax-qualified retirement plan was taxable in the year distributed — even though the recipient failed to cash the check. The ruling does not indicate whether the same holding would apply if the check were actually received in a subsequent year. The IRS also did not say whether the ruling is limited to 401(a) plan distributions or whether it also applies to IRA distributions.
The IRS also ruled that the plan administrator’s obligations for withholding and reporting arose in the year of distribution, and those obligations were not altered by the recipient’s failure to cash the check during that year.