IRS Says 2017 Hurricane Distributions Should Be Reported on Form 1099-R as Penalty Tax Exception

The IRS provided information on its website in January 2018 regarding reporting 2017 IRA and retirement plan “qualified hurricane distributions” on the 2017 Forms 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. The IRS and Congress made these tax-favored distributions available for certain individuals affected by Hurricanes Harvey, Irma, or Maria. (See the Ascensus October 2017 Washington Pulse for more details.)

The IRS is mandating the use of code 2, Early distribution, exception applies, on Form 1099-R to report qualified hurricane distributions made in 2017. As of this writing, the IRS had not yet released the 2018 Form 1099-R and instructions.

IRS Says Can Rely on Individual’s Statement

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.

Reporting Corrections Not Required

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.

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