IRS Clarifies Tax Rules for Uncashed Retirement Checks

The IRS has provided updated guidance on federal tax withholding and reporting obligations for uncashed retirement plan distribution checks and any subsequent reissued payments.

Revenue Ruling 2025-15 addresses a scenario in which an individual receives a distribution check from a qualified retirement plan, but the check remains uncashed and is later voided, prompting a second check to be subsequently issued.

Key takeaways from the ruling include:

• Employers cannot claim an adjustment or refund for taxes withheld on an uncashed distribution check, even if the check is voided and reissued. Once the tax is withheld and remitted to the Treasury, it stands as final;
• If the reissued check reflects the same benefit amount as the original check, no further withholding is required. However, if the benefit has increased, the excess amount is treated as a new distribution subject to tax withholding; and
• Employers must report the original distribution, even if the check goes uncashed on IRS Form 1099-R. If a second check includes an increase of at least $10, that excess must be reported separately.

The guidance aims to standardize treatment and improve compliance regarding retirement distributions that are not immediately cashed by recipients.