Benefits & ERISA Law

IRS Changes Reporting of ESOP Distributions on Form 1099-R

By Suzanne Wynn

The IRS released Announcement 2008-56 today. In the short 2-page announcement, the IRS states that it will require dividends on employer securities that are distributed from an employee stock ownership plan (ESOP) under Code section 404(k) to be reported on Form 1099-R that does not report any other distributions. If there are other distributions from the plan in those years, they must be reported on a separate Form 1099-R. Payments of 404(k) dividends made directly from the corporation to the participants or their beneficiaries will still be reported on Form 1099-DIV. This requirement applies to distributions from a plan that are made in 2009 or later.

This announcement revokes Announcement 85-168. Announcement 85-168 permitted plans to use Form 1099-DIV if taxpayers used short Form 1040A to report 404(k) dividend income. Under Announcement 85-168, if 404(k) dividends were distributed in the same year as a total qualified distribution, the entire amount could be reported on Form 1099-R.

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Full post as published by Pension Protection Act Blog on June 10, 2008 (boomark / email).