IRS Wants Hurricane Distributions Reported as Penalty Tax Exception on 2017 Forms 1099-R

The IRS has recently updated its webpage entitled About Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. with a note under Recent Developments regarding the reporting of retirement and IRA distributions to individuals affected by Hurricanes Harvey, Irma, or Maria.

The note, dated January 2018, mandates the use of Code 2 on Form 1099-R to report such distributions made in 2017, known as “qualified hurricane distributions” under the relief provided to victims by both the IRS and Congress. (As of this writing, the 2018 Form 1099-R and instructions had not yet been released.)

Due to the informal nature of the release of this information, Ascensus contacted an IRS official familiar with the matter. The official’s response, which represents oral, unofficial guidance, acknowledged the posting on its website. The official stated that financial organizations can rely on an IRA owner or retirement plan participant’s statement that the distribution is a qualified hurricane distribution.

Ascensus was also told that corrected 2017 Forms 1099-R are not required as a result of this guidance, and that the IRS will be issuing new Forms 8915A and 8915B for taxpayers to report such distributions. The Form 8915 was previously used from 2006 to 2009 to report distributions and repayments as a result of Hurricanes Katrina, Rita, and Wilma.

More information on qualified hurricane distributions can be found at the IRS website.