2020 IRA Distribution Correction
Hello, our back office made a processing error and completed a duplicate IRA distribution for a client. We were able to reverse the net amount but since it is now 2021 we are not able to reverse the $5000 in federal tax withholdings. My firm does not give tax advice but is there a way the client could work with a tax adviser on possible using the federal tax withholding to be applied for future IRA distributions?
Just looking for any feedback or thoughts. Thank you.
Permalink Submitted by Alan - IRA critic on Wed, 2021-03-03 18:20
The withholding was apparently done in 2020. When the client files his 2020 tax return he will get credit for the 5000 against his 2020 taxes. Instead of a tax refund for 2020, he can ask that any portion of the refund amount be credited against his 2021 tax bill.