Can Fidelity Issue a Corrected 1099-R for Errors?

Understanding tax documents is crucial for managing personal finances, particularly regarding retirement accounts. The 1099-R form is essential for reporting distributions from pensions, annuities, and retirement plans. Errors on these forms can lead to complications with the IRS, making accuracy critical.

When a 1099-R Is Issued by Fidelity

Fidelity, a major financial services company, issues the 1099-R form to report distributions from retirement accounts such as IRAs, 401(k)s, and pensions. This document details the taxable portion of distributions received during the year. A 1099-R is issued whenever a distribution occurs, including full or partial withdrawals, rollovers, conversions, or recharacterizations, each carrying unique tax implications.

The IRS mandates that taxpayers receive the 1099-R by January 31 of the year following the distribution, providing time for tax filing. The form includes details like the gross distribution amount, taxable amount, and any federal income tax withheld. Distribution codes in Box 7 specify the type of distribution and its tax treatment. For instance, Code 1 represents an early distribution, while Code 7 indicates a normal one. Understanding these codes is key for accurate tax reporting.

Distribution Codes

The 1099-R form uses distribution codes in Box 7 to clarify the tax treatment of distributions, helping taxpayers report income correctly.

Early Distributions

Code 1 refers to early distributions, withdrawals made before the account holder turns 59½. These are generally subject to a 10% additional tax penalty under IRC Section 72(t). Exceptions exist for qualified expenses like higher education, first-time home purchases, or medical costs exceeding 7.5% of adjusted gross income. Proper documentation is necessary to claim these exceptions and avoid penalties.

Disability Distributions

Code 3 represents disability distributions, which apply when withdrawals result from the account holder’s disability. As defined by IRC Section 72(m)(7), a qualifying disability prevents the individual from engaging in substantial gainful activity and is expected to result in death or be long-term. These distributions are exempt from the 10% penalty but remain subject to regular income tax. Medical documentation is needed to confirm disability status.

Death Distributions

Code 4 indicates distributions to a beneficiary after the account holder’s death. These are not subject to the 10% penalty, regardless of the beneficiary’s age, as outlined in IRC Section 72(t)(2)(A)(ii). Tax treatment depends on the account type and the beneficiary’s relationship to the deceased. A surviving spouse can roll over the distribution into their own retirement account to defer taxes. Non-spouse beneficiaries may need to take distributions within a specific timeframe, such as the 10-year rule for inherited IRAs.

Corrected and Amended Forms

If discrepancies are found on a 1099-R form, Fidelity can issue corrected versions to address errors. These may involve incorrect distribution amounts, misreported tax withholdings, or inaccurate distribution codes. Taxpayers should review their 1099-R forms and compare them with their records. If an error is identified, contacting Fidelity’s customer service is the next step. Supporting documentation, such as account statements, may be required to initiate corrections. Once verified, Fidelity issues a corrected 1099-R form, marked “Corrected,” with updated information. Taxpayers must use the corrected form for their tax filings.

Financial institutions must provide corrected forms to both the taxpayer and the IRS to ensure consistent records. Prompt issuance of corrected forms is vital to prevent complications, such as the need for taxpayers to file amended tax returns. Acting quickly is essential for resolving issues efficiently.