I requested a draw from my 401K on 12/28/2006; it was pulled from my 401K account by Fidelity, but they didn't deposit it into my checking account via EFT until 1/2/2007. Is this taxable income for 2006; Fidelity reported it on a 2006 1099-R? I think it is taxable income for 2007 since I didn't receive it from Fidelity until 1/2/2007.:confused:

It's just like if you wrote a check on the check to pay a bill on the 29th of Dec and it didn't clear the bank until Jan 2nd. You would still count it as being paid in Dec, right? Same difference. It's when you ordered the distribution.

Mobea is right, but it depends on when FIDELITY records the distribution.

If they recorded the distribution on 28 Dec 2006, then it is taxable for 2006.

If they recorded the distribution on 2 January 2007, then it is taxable for 2007.

If you got a Form 1099-R for 2006, that settles the issue in the eyes of the IRS.

It's just like if you wrote a check on the check to pay a bill on the 29th of Dec and it didn't clear the bank until Jan 2nd. You would still count it as being paid in Dec, right? Same difference. It's when you ordered the distribution.


Mobea, thank you. Since I received a 1099-R from Fidelity for the distribution as having been made in 2006, I think I'm stuck with having to report the extra income as occurring in 2006. There's always a chance that Fidelity made an error in reporting it for 2006, so I asked the IRS to review situation (a three-day holiday caused the delay in the posting of the distribution to my account in 2006) and make an adjustment to my tax returns if needed. I understood your analogy, but the rules are different for income reporting. For example, companies are allowed to defer reporting salary payouts until the following year - The dates on this example aren't accurate, but, I've had almost two full weeks of pay in 2003 reported as paid out in 2004 and taxed in 2004. It's a weird setup and not as simple as it seems. If they can do that, why shouldn't income paid out by Fidelity be able to be reported in 2007 - especially since it wasn't received until 2007?

Mobea is right, but it depends on when FIDELITY records the distribution.

If they recorded the distribution on 28 Dec 2006, then it is taxable for 2006.

If they recorded the distribution on 2 January 2007, then it is taxable for 2007.

If you got a Form 1099-R for 2006, that settles the issue in the eyes of the IRS.


AtlantaTaxExpert, thank you. I never hurts to ask, which is why I asked the IRS to consider that Fidelity might have incorrectly reported the distribution. What do they call the time frame between reporting money paid and actually paying it - float. Can Fidelity legally "float" a payment? -Report it as paid, but not actually pay it for several days? Does the method of payment matter? This was an EFT payment not via US Mail. Well, this is all conjecture at this point in time.

I'm not an expert, but it seems to me that Fidelity and the IRS would both argue that the money was actually withdrawn from the 401(K) on Dec 28 - that is the date the money is no longer in the 401(k). Hence that is the date that gets reported. The fact that it may have been caught up in the "float" and you didn't have access to the money is unfortunately not relevant. Think about the analogous situation of selling shares of stock - the date of sale is the date that the transaction is booked, not necesarily the date when you actually transfer the physical stock certificate or receive a check.

Since you got the 1099-R from Fidelity, it is clear that Fidelity considers the money distributed in 2006.