IRS: Uncashed Payout Checks From Retirement Plans Are Still Taxable
You owe tax on a 401(k) or IRA distribution for the tax year in which the money was paid out, even if you don't cash the check until the following year.

Deferring income is a traditional tax-saving strategy, but a recent IRS ruling clarifies that not cashing a retirement plan distribution check doesn’t count.
If your retirement plan sends you a check for a distribution, the IRS’s Revenue Ruling 2019-19 spells out that you owe tax on the amount for the tax year in which the plan distributed the money—even if you don’t receive your check or cash it until the following year. The plan sponsor must file a Form 1099-R, reporting the distribution and any withholding, in the same year the money is distributed.
The ruling makes it clear that you can’t hold off on paying taxes by taking a distribution at the end of the year, then holding on to the check and cashing it in January or beyond of the following year, says IRA expert Ed Slott. “Even though you may think you can defer until another year, it’s still taxable for the year it came out of your plan,” he says.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The IRS most likely received enough questions on the timing to issue such a broad rule, Slott says. Some businesses hold on to checks received for services until a subsequent calendar year and record the money as income then, and individual taxpayers may have assumed the same practice was allowable for retirement plan distribution checks.
Although the ruling only refers to 401(k) plans and other tax-qualified plans, Slott says the same treatment already applies to IRA distributions as well.
One way to avoid the issue altogether: Consider using direct deposit if your custodian offers it. That could eliminate any potential problems, Slott says, because the check would be deemed immediately cashed.
But plans aren’t required to offer a direct deposit option and some plans will only process distributions by check, says Jeffrey Levine, chief executive officer of BluePrint Wealth Alliance, in Garden City, N.Y.
The check can get lost or forgotten, or a recipient may not have the mental capacity to remember requesting the distribution. “It would be great to have the money move right from account A to account B,” Levine says, but that isn’t always possible.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

-
46 Anti-Prime Day Tech Deals You Should Get from Best Buy's Black Friday in July Sale Instead
Apple, Blink, Garmin, Samsung and more leading tech brands are on sale at Best Buy's rival Prime Day sale this week.
-
Stock Market Today: Trump Reextends His Tariff Deadline
When it comes to this president, his trade war, the economy, financial markets and uncertainty, "known unknowns" are better than "unknown unknowns."
-
Ask the Editor, July 4: Tax Questions on Inherited IRAs
Ask the Editor In this week's Ask the Editor Q&A, we answer tax questions from readers on the rules on inheriting IRAs.
-
IRS Watchdog: Three Problems the IRS Must Address in 2025
IRS The tax season is over, but new changes to the IRS can pose risks to your taxpayer experience.
-
Ask the Editor, June 27: Tax Questions on Disaster Losses, IRAs
Ask the Editor In this week's Ask the Editor Q&A, we answer tax questions from readers on paper checks, hurricane losses, IRAs and timeshares.
-
Ask the Editor, June 20: Questions on Tax Deductions and IRAs
Ask the Editor In our latest Ask the Editor round-up, Joy Taylor, The Kiplinger Tax Letter Editor, answers four questions on deductions, tax proposals and IRAs.
-
Don't Miss These Four Tax Breaks for Americans Living Abroad in 2025
International Tax U.S. expats can reduce their tax burden by taking advantage of a handful of tax credits and deductions.
-
Ask the Editor, June 13: Questions on Home Sales and Taxes
In our latest Ask the Editor round-up, Joy Taylor, The Kiplinger Tax Letter Editor, answers questions on home sales and calculating tax basis in a home.
-
Ask the Editor, June 6: Questions on Hobby Losses, Medicare
In our latest Ask the Editor round-up, Joy Taylor, The Kiplinger Tax Letter Editor, answers questions on hobby losses, I bonds and Medicare premiums.
-
Ask the Editor, May 30: Questions on the One Big Beautiful Bill
Ask the Editor In this week's Ask the Editor Q&A, we answer tax questions from readers on the House-passed “One Big Beautiful Bill.”