The IRS, in private letter ruling (PLR) 200541049, has granted a taxpayer the ability to execute a rollover to an eligible retirement plan three years after the qualified retirement plan of his former employer made a cashout distribution of his account balance. The check for this cashout distribution (an amount less than $5,000, check written in 2002) was never received by the taxpayer, and never cashed.
The IRS subsequently contacted the taxpayer concerning a tax deficiency resulting from failure to include the distribution in income (a Form 1099-R was generated), plus an early distribution penalty. A Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., was generated. The taxpayer subsequently contacted his former employer, and a new check was issued.
However, due to conflicting information received by the taxpayer and his personal unfamiliarity with rollover requirements, this second check was not timely deposited. The IRS has determined, as described in this PLR, that it is within the bounds of equity and good conscience that the taxpayer be given the opportunity to complete the rollover, in this case to the 401(k) plan of his current employer.
This PLR may be accessed at http://www.irs.gov/pub/irs-wd/0541049.pdf.