I received an early 401(k) distribution from an old employer's 401(k), which I chose not to roll over. The check was dated December 31st, 2012, but I received the funds in early January. Do I have to take this income in tax year 2012 or can I hold it until 2013? I did receive a tax form from the company, but believe this would be like a paycheck, it applies to when the funds are received not when they were earned.

ANSWER

The BIDaWIZ Team's Answer:

The distribution is recorded when constructively received as per IRS publication 17. Technically speaking, when the check is dated and withdrawn from your account, the funds are constructively received. You do not need to physically have position of the funds. In addition, the issuer sent you a 1099 that will be reported to the IRS for the 2012 tax year. If you exclude that amount and instead report that for the 2013 tax year, there will be a discrepancy and likely a notice from the IRS.