IRS Issues Uncashed Check Withholding Guidance

The IRS has issued Revenue Ruling 2025-15, offering detailed guidance on how to handle federal tax withholding and reporting when retirement plan distribution checks go uncashed and must be reissued.

The guidance provides analysis based on the following fact pattern. A lump sum distribution of a pre-tax source account valued at $800 was made on behalf of a participant with required federal withholding. The check went uncashed for six months whereby the stale check was replaced with a reissued check for the same amount (no additional earnings accrued in the interim). 

The IRS states that no adjustment to the withholding amount is permitted since the correct amount of tax was withheld and not exceeded. A Form 1099-R would be filed for the tax year of the initial distribution, with $800 in Box 1 and Box 2a, and the federal income tax withheld in Box 4. 

The IRS also noted that additional withholding and reporting obligations would only apply if the reissued check is for a greater amount (for example because of earnings), and that amount will be considered a separate distribution that would be subject to withholding and reporting, subject to the $10 reporting threshold.