My client’s husband passed away and received his NQ plan as a beneficiary. She is the spouse. The recordkeeper sent the spouse a check for the NQ plan without any taxes withheld and created a 1099. The plan stipulates that all distributions go back to the company and the company will send the money and create a W2. The original check from the recordkeeper has been cashed and deposited to the spouse’s checking account.

What are the options here since NQ money should be reported on W2’s? The recordkeeper is not wanting to reverse the distribution/1099 but without the taxes withheld, it will raise red flags. Any help is appreciated.