1099-R State Tax Entity Not Identified

[gooddog]

I have a 1099-R for an IRA paid out after the death of my father in California. The bank that created the 1099-R shows that $21,000 was paid in Box 14 "State Tax Withheld". There is no indication of which state it was paid to. My tax preparer says that he can't use the form because there is no state listed. The bank says "that's how we always do it". This is my first go around with a 1099-R. Who is right, my tax preparer or the bank? Can my tax guy use the form considering it doesn't identify California as receiving the $21,000? California has already has kept $'s back that are owed to the estate, so I'm thinking they would no doubt grab another $21k if the opportunity presented itself.

 

[pb4uski]

I think that they are both wrong, but your bank is more in the wrong.

If the bank withheld for California state income taxes from the distribution then the 1099-R should so indicate, incuding the state. I would call the bank back and be more insistent. Ask that it be escalated to their chief tax officer.

If the bank still refuses to issue a revised 1099-R then call the California tax department and see if they can confirm that the bank remitted $21,000 of taxes withheld to them.

Do you have the details of the withdrawal/distribution? $21,000 of state tax withheld is a huge number... suggesting a withdrawal/distribution of ~$1 million and perhaps $200k of federal income tax withheld. Who does that?

While I can understand your preparer's hesitancy to use it for the California state income tax return without the state being identified, if the bank refuses to fix it AND you can confirm that the bank did indeed withhold $21,000 of California state income tax, then I would file as so.

The worst thing that could happen is that California refuses to recognize the $21,000 withheld, in which case the bank may have committed fraud by withholding the state income tax but not remitting it to the state... and they put people in jail for things like that.

 

[gooddog]

I think that they are both wrong, but your bank is more in the wrong.

If the bank withheld for California state income taxes from the distribution then the 1099-R should so indicate, incuding the state. I would call the bank back and be more insistent. Ask that it be escalated to their chief tax officer.

If the bank still refuses to issue a revised 1099-R then call the California tax department and see if they can confirm that the bank remitted $21,000 of taxes withheld to them.

Do you have the details of the withdrawal/distribution? $21,000 of state tax withheld is a huge number... suggesting a withdrawal/distribution of ~$1 million and perhaps $200k of federal income tax withheld. Who does that?

While I can understand your preparer's hesitancy to use it for the California ate income tax return without the state being identified, if the bank refuses to fix it AND you can confirm that the bank did indeed withhold $21,000 of California state income tax, then I would file as so.

The worst thing that could happen is that California refuses to recognize the $21,000 withheld, in which case the bank may have committed fraud by withholding the state income tax but not remitting it to the state... and they put people in jail for things like that.

I have considered that the bank may have not remitted the funds. The bank called me back after I posted this and said that they are looking into why their 1099 forms do not have this information on them and are looking into correcting that going forward. It is stunning to me that this has not come up before, and that the California Franchise Tax Board accepted their incomplete 1099 forms for decades. Strange stuff.

 

[Jerry1]

I would put the payers ein/tin from the box under the address in for box 15. The problem is getting your tax preparer to do that.

Definitely do as pb4uski said and see if you can confirm with the state (California) to ensure that they recognize the amount in your account. I would also try to get the bank to issue a correct 1099R. “That’s how we do it” is not correct. Look up the instructions for filling out the 1099R. There are official instructions from the IRS and if that says it needs to be filled out, show that to the bank.


ETA: Apparently, boxes 14-19 are optional.

Instructions for Forms 1099-R and 5498 (2024) | Internal Revenue Service

www.irs.gov

Given that they’re optional, I don’t understand why your preparer won’t file your taxes. He can certainly file your Federal return while you deal with the State and your Bank to figure out how best to handle. Hopefully, the bank will just do the right thing and enter the data in the form.

 

[pb4uski]

I have considered that the bank may have not remitted the funds. The bank called me back after I posted this and said that they are looking into why their 1099 forms do not have this information on them and are looking into correcting that going forward. It is stunning to me that this has not come up before, and that the California Franchise Tax Board accepted their incomplete 1099 forms for decades. Strange stuff.

Well, if the bank admits that they are looking to correct it going forward than that is a concession that it is wrong and they should therefore be willing to issue you a corrected 1099-R.

 

[cathy63]

I would put the payers ein/tin from the box under the address in for box 15. The problem is getting your tax preparer to do that.

This will cause the California e-file to be rejected. CA EINs are only 8 digits long while Fed EINs are 9 digits.

 

[cathy63]

I have considered that the bank may have not remitted the funds. The bank called me back after I posted this and said that they are looking into why their 1099 forms do not have this information on them and are looking into correcting that going forward. It is stunning to me that this has not come up before, and that the California Franchise Tax Board accepted their incomplete 1099 forms for decades. Strange stuff.

Do you have access to last year's tax return documents? If you can find the previous 1099-R it may have the correct SEIN.

A couple of years ago I had a Tax-Aide client who had a similar issue for a deceased parent who had lived in California and had state taxes withheld from an IRA withdrawal at First Republic Bank. The daughter lived in WA and had the 1099-R mailed there, but the bank didn't put any state name or SEIN in the state fields, just the amount. I too was boggled that they could just leave this info off the form, and they were very unhelpful about fixing it. After lots of run-around they told her that the taxes must have been remitted to WA and she should file a return there.

I then wrote her an email that basically said "they obviously didn't send this money to a state that has no income tax so they may have just kept it, which would be fraud, and if they won't tell you where it actually went you should complain to the FDIC and the CA Attorney General's office". She forwarded my email to the bank and they coughed up a corrected 1099-R which at least had CA in the state field but still no SEIN. We could not find an SEIN for them so we filed the return using 999999. She ended up getting a letter from the FTB asking for more documentation of the withholding, and she finally had to call them and talk to some type of ombudsman, but they did send the refund in the end.

A few months later I heard that First Republic was caught up in the Silicon Valley Bank failure and got shut down by the FDIC. I was not sad about their demise.