Form 1099-R: Refund Q & A

Updated January 27, 2009

I received two 1099-R Forms. Why?

Is my refund subject to Massachusetts state income taxes?

I moved to another state in the year I took the refund. Is my refund subject to state income tax in the state in which I am living?

Federal taxes were withheld from my refund. Why?

Is there a penalty for withdrawing my funds and having the pre-tax portion sent to me directly?

Is the interest I received as part of my refund considered pre-tax money?

I believe that my 1099-R regarding my refund is incorrect. What should I do?

I received two 1099-R Forms. Why?

If you had:

• a portion of your refund directed to you and a portion directed to a different account (or accounts), OR
• your refund directed to more than one account,

then you will receive a separate 1099-R for each different payee or account.

No.

You need to check with your state’s Department of Revenue to determine whether the refund you received is taxable in that state.

The IRS requires that 20% of the taxable portion of your refund (pre-tax contributions and interest) be withheld for federal taxes if you received the pre-tax portion of your refund directly and did not opt to have these funds rolled over to an IRA or other qualified plan. If you rolled over a portion of your pre-tax funds and received the other portion directly, then 20% of the pre-tax portion paid directly to you will be withheld for federal taxes.

Yes. If you receive a payment before you reach age 59-1/2 and you did not roll it over, then, in addition to the regular income tax, you will have to pay an extra tax equal to 10% of the taxable portion of the refund. For more information on the additional 10% tax, see IRS Form 5329.

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Is the interest I received as part of my refund considered pre-tax money?

Yes. Interest is pre-tax money and is subject to the 20% federal income tax withholding and the 10% early withdrawal penalty.

Please write to our main office; be sure to include your telephone number, enclose a copy of your 1099-R and indicate the information you believe to be incorrect. We will review your 1099-R and, if necessary, issue a corrected 1099-R to you. Likewise, if no changes are necessary, we will notify you.