12 Days of Giving Day 9: Fighting an Erroneous 1099-R and Winning $146K Back

If you still believe “the IRS already knows what you made, they should just do your taxes for you,” this episode might slap that idea right out of your head.

In today’s 12 Days of Giving episode, I’m back with Enrolled Agent, Morgan Q. Anderson, breaking down a real story where the IRS seized a client’s $116,000 refund over a 1099-R that reported roughly $196,000 of “income” he never actually received. The investment fund admin bailed, paperwork got lazy, and a bad form turned into a six-figure tax bill and years of stress for a real family.

We walk through how this happened in the first place: an alternative investment, a change in administrator, broken communication, and then a “we’re done here” 1099-R sent to the IRS like the account was cashed out. The money never hit his bank account—but the system doesn’t care. It just saw a big number, flagged “unreported income,” and quietly grabbed his refund to cover a tax that should never have existed.

Then we get into the fight. Morgan explains exactly how she rebuilt the timeline, pulled old statements, got a letter from the investment manager, and used the Taxpayer Bill of Rights and the Taxpayer Advocate Service to force the IRS to slow down long enough to see the truth. This wasn’t a quick phone call. It was months of “we need 90 more days” letters, escalation, and refusing to roll over.

The payoff? The IRS not only returned his $116K refund, they had to pay tens of thousands in interest for sitting on money that never should’ve been theirs. That’s the difference between “the IRS must be right” and “prove it.”

We close with a playbook you can actually use: how to pull your wage & income transcript and see what’s being reported under your Social Security number, what to do when a 1099-R or other form is flat-out wrong, and when to stop DIY-ing it and bring in someone who knows how to fight inside the system.

👉 Watch the full episode on YouTube: https://youtu.be/It_EkPInwj8

As always we ask you to comment, DM, whatever it takes to have a conversation to help you take the next step in your journey, reach out on any platform!

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DISCLOSURE: Awards and rankings by third parties are not indicative of future performance or client investment success. Past performance does not guarantee future results. All investment strategies carry profit/loss potential and cannot eliminate investment risks. Information discussed may not reflect current positions/recommendations. While believed accurate, Black Mammoth does not guarantee information accuracy. This broadcast is not a solicitation for securities transactions or personalized investment advice. Tax/estate planning information is general - consult professionals for specific situations. Full disclosures at www.blackmammoth.com.

Episode Transcript

Stoy Hall, CFP® (00:10):
Everybody raise your hand if you know what a 10
99 R is.
Or 10 99 in general.
I do.
Most of you probably do not.
Or if you do, you don't know howto affect you specifically if
one is erroneous or not.
Ooh, that should, that's morelike spooky music.
Should, it shouldn't beChristmas music, but hey, this
is where we're at, Morgan's backon, uh, and we're going to dive

(00:32):
into that.
So, Morgan, without further ado,why don't you, why don't you
download us on the, the wholesituation and, uh, everything.

Morgan Anderson (00:38):
Okay.
Uh, kick your feet up for asecond.
I'm gonna tell you a tail.
It does start off a little bitlike a Halloween type tail
because it's a little scary, butwe have some Christmas tidings
at the end.
So, had a client in tax year2019, an account administrator
for an investment fund issued a10 99 R that was erroneous.

(01:03):
Okay?
This led the IS.
To assessing additional taxagainst my client and then
capturing a massive refund thatwas rightfully due.
So here's the backstory.
In 2015, we had a client whoinvested$90,000 into an
investment fund.
The fund closed in August of 17with a profit of$16,000.

(01:27):
Then those funds were reinvestedin February of 18 into a
different investment fund inApril of 19.
Hope y'all are keeping track onthis timeline.
The account administrator, thethe record keeper for my
client's monies in theseaccounts.
Resigned their position becausemy client had moved, wasn't

(01:49):
keeping track of everything, andthe credit card they had on
record with the accountadministrator expired.
So there was no way for thiscompany to keep charging the
fees for the oversight, and theyresigned from the account and my
client just wasn't payingattention.
Right.
They deal with pretty highdollar transactions and just.
Outta sight outta mind moved.

(02:11):
Didn't even think about it.
The account administrator thenissued a 10 99 R for$196,000.
Now the 10 99 R included notjust the original$90,000
investment and the profit earnedfrom that first.
Fund when it closed, but thenalso added on top of it the

(02:34):
investment into the secondcount.
So it created this 196,000, andthis company said, you know
what?
We're not in charge of thisaccount anymore for this
taxpayer.
We wash our hands of it.
Here's a 10 99 IRS.
For$196,000 that this taxpayerreceived now 10 99 R story.

(02:54):
Do you wanna fill'em in on whatthose are?
I mean, I don't even know

Stoy Hall, CFP® (02:58):
all of that much.
Right.
Um, my recollection of a 10 99 Ris a 10 99 in terms of
retirement distributions.

Morgan Anderson (03:06):
It is a distribution.
It's a distribution frompensions, retirement funds,
annuities, IRAs.
So essentially what this accountadministrator did was said to
the IRS, all of these positivefinancial transactions.
We've overseen.
We're just lumping it alltogether and reporting to the

(03:26):
IRS in this taxpayer's socialsecurity number and name that
they had 196,000 in transactionsthat have essentially been
distributed to them.
So not only were there numbers.
Wrong, but the money never leftthe fund.
It was just the accountadministrator stopped being
involved.

(03:46):
Right.
So Skeezy, right.

Stoy Hall, CFP® (03:48):
Skeezy.
Was it in a retirement fund too?
Pardon?
Was it an actual retirement fundthough?
No, it was just an investmentfund on top of all of it.
Yep.
Yep.

Morgan Anderson (03:58):
So.
Taxpayers that, pardon?
There's so many layers

Stoy Hall, CFP® (04:04):
to this.

Morgan Anderson (04:04):
I know.
So many layers to this.
I mean, when I first becameinvolved, I had to write
everything out in a timeline andsay, okay, I wanna make sure
that I'm following this properlybecause this can, this seems so
outlandish.
So remember, the taxpayer movedright?
They never received a copy ofthe 10 99 R that was issued in
2019 in their name.

(04:26):
By late 2020, the fund, thesecond fund that they had
invested all these monies intohad lost a bunch of money.
It closed, and the taxpayerended up receiving 57,000 and a
realizable loss of over 48,000.
Okay, so in 2021, the IRScontacted my client and said,

(04:47):
Hey look, we got this 10 99 Rfrom this account administrator
reflecting 2019 activities, andyou've got$196,000 of unreported
income.
We're gonna propose.
Adding tax to that year, and theclient's like, wait a minute, I
didn't, first of all, the moneynever left the fund.

(05:07):
I never had$196,000 in it.
What is going on?
So he tried contacting thataccount administrator.
And these people were so rudeand they said, you know what?
If you've got a problem, youneed to deal with it.
With the IRS.
We're not fixing anything.
Right?
This happens more than you canimagine, which is really sad.

(05:29):
There's just no integritysometimes with these situations.
So he con, my con clientcontacted the IRS and said,
look, there's a problem.
I never.
First of all, the fund never had196,000 in it, and second of
all, never took any money out in2019.
This is wrong.
Well, the IRS said, no, yougotta go back to the account

(05:50):
administrator and fix it withthem.
They need to issue a correction.
So this goes on back and forth.
The IRS.
In 2021 ended up, or pardon me,2022, ended up capturing from my
client's 2021 tax return over$116,000 in refund.
The client was expecting andthey applied it to this debt, to

(06:13):
this proposed additional.
Well, at that point it was a.
An additional tax assessment, somy clients out 116,000, had
never had that much money inthis fund to begin with, and is
like, I, I don't even know whatto do.
I can't get the IRS to help.
I can't get this accountadministrator to fix their
error.
He tries a couple more times,rounds between the two.

(06:35):
Can't get anything done.
Finally reaches out to us inDecember of 23.
And like I said, I had to writedown the whole timeline so I
could make sure I understood itcorrectly.
But he was right.
This 10 99 R should have neverbeen issued and it never should
have been issued for theoriginal investment, the profit

(06:56):
earned on that originalinvestment, and then the
reinvestment into the secondfund of those same monies.
Right.
So we knew we were dealing withlike.
Taxpayer Bill of Rights issue.
One of the taxpayer Bill ofRights that the IRS
acknowledges, you can look it upon their website, is you have
the right to pay no more thanthe correct amount of tax that

(07:17):
you should justifiably owe.
Okay?
So we knew this client'staxpayer rights had just been
trampled on all over the place.
So we submit a request to theIRS in January of 2320, pardon
me, January of 24, and.
All of other documentation.
We ended up getting a letter,um, from the person who had

(07:38):
proctored the in the fund, thefounder and and manager of it.
He ended up writing a lettersaying, Hey, this taxpayer never
withdrew money in 2019.
We don't know what happened withthis company, but we can attest.
To the fact that no monies wereever withdrawn.
We had copies of statementsshowing, no, no movement of
monies in 2019.

(07:59):
So we submit that in January of24 with like 45 pages of
supporting documentation, andthen we start receiving notices
from the IRS saying, oh, we gotyour correspondence.
We need 90 days to look at it.
We got five rounds of those.
We'd wait 90 days, then getanother one, and then wait 90
days and then get another one.

(08:20):
And meanwhile, we're calling theIRS.
The case was being handled inFresno and they said, yes, we
see it here.
We're just waiting for somebodyto handle it.
And when we got our fifth 90 daynotice letter, I said, this is
enough.
We contacted the taxpayeradvocate, got them involved, and
from July to September of 2025,I had four conversation with the

(08:42):
advocate.
She went through everything sheput on armor, went to bat with,
um, the Fresno office for ourclient's.
Uh, interest ended up not onlygetting the$116,000 back to him,
but also over.
$30,000 in interest.
So that's why I say it's aChristmas story.
Right.
Even though the IRS had 116,000of my client's money tied up for

(09:07):
almost two years, we ended upgetting interest paid on all
that money,

Stoy Hall, CFP® (09:12):
first of all, the layers to this story.
I

Morgan Anderson (09:14):
know, right?

Stoy Hall, CFP® (09:17):
Like this is the.
There's a movie about this,right?
What?
What's crazy?
I, I guess the part that I tookout the most, I mean, not the
most, the thing that I didn'tthink was gonna happen at the
end of this story was the factthat you also got interest.
Mm-hmm.
Because that's one thing that.
The IRS and the government arereally good at doing is not
applying any interest back toyou when they're at fault.

(09:38):
I know.
So I love that part of the wholestory, but yeah.
Holy crap.
So let's, let's walk throughthis a little bit.

Morgan Anderson (09:43):
I know, I know.
That was a whole, that was amouthful, wasn't it?
Client,

Stoy Hall, CFP® (09:47):
client invests in a fund in, in what?
Probably 20 18,

Morgan Anderson (09:52):
20 15.
It was$90,000.

Stoy Hall, CFP® (09:55):
So invest it does what it does.
They, they obviously haveadministrator of it.
Mm-hmm.
In 2019 or before the, thepayment ceases'cause he moves,
loses sight outta sight item.
Mine situation, 2019 they sayScrew it, we're done with it.
So instead of us putting it onour books, we're just going

(10:16):
submit a 10 99 R, 10 99 R, getit out of here and not deal with
it.
Leaving him with now a giant taxbill come.
When the IRS finally found it in2021 of 116,000, right?

Morgan Anderson (10:28):
Correct.
Well, no, they had said, so thetax was 116,000.
The account administratorreported 196,000 was
distributed, which

Stoy Hall, CFP® (10:40):
did not happen.

Morgan Anderson (10:41):
Totally false.

Stoy Hall, CFP® (10:42):
Right, right.
So we're talking about 2019 whenhe, 20, 20, 24 years, four years
of, of stress.
Out of, uh, out of all hismoney.
'cause it's no longer to bethere.
Right.
Um, going back and forth fiverounds at 90 days is stressful
enough.
I'm sure he got many othernotices that the IRS

(11:02):
automatically spits out.
Anyway, that terrifieseverybody.
Absolutely.
Get you involved in when youguys are involved.
Still not a lot of movementhappening.
Luckily we had a advocate decideto put the armor on and do their
job, which is amazing.

Morgan Anderson (11:14):
Yeah.
And which is, which is ananomaly right now because
they're so overwhelmed with theinefficiencies at the IRS

Stoy Hall, CFP® (11:23):
and it all works out very well in the, in
the end.

Morgan Anderson (11:25):
I

Stoy Hall, CFP® (11:25):
know.

Morgan Anderson (11:26):
Wrapped it up with a bow at the end, didn't
we?

Stoy Hall, CFP® (11:29):
One, it's scary.
It's, it's it's scary situation,but I also want everyone to
realize that one, mistakeshappen.
Yes.
But when you receive a notice ingeneral from the IRSA 90 day or
a 60 day, or scream out top oflungs that you owe this much,
typically those are just, Idon't wanna call'em scare
tactics because they don'tnecessarily do it on purpose,
but they're scare tactics,right?
Mm-hmm.

(11:49):
They're to get you to act and tomove immediately, and usually
you'll make a mistake out offear if he wasn't intelligent
enough.
To understand that and to justlet it happen.
We're talking 106,$146,000 thatnow he has that he didn't have
before.
Right, right.
And I wanna summarize that ofpeople do not be afraid, take it
to somebody.

(12:09):
Those notices, those letters arenot always accurate, mostly are
just automatically generatedbecause something popped.
Correct.
Human has not reviewed them.
Correct.
Hence the 90 days.
'cause they're waiting becausethey're understaffed and
government shut down and youname all the things, uh, all the
things into that.
And so I want, I want to takethat from it, but what did your
client take from this processand scenario?

Morgan Anderson (12:32):
So one of the things is to be proactive with
checking the third party reportson your behalf.
Every year, so all of us canaccess our tax account on the
IRS's website and pull records,they call it the wage and income
transcript.

(12:53):
You can pull that to see whathas been reported in your name
tied to your social securitynumber.
So

Stoy Hall, CFP® (13:00):
right simple.

Morgan Anderson (13:01):
Yes.
So simple to do.
But it is you being proactiveand and owning what's being
reported in your name.
If you do that, you're gonnastay ahead of any type of
situation like this where theIRS says, Hey, we got reports.
You know, we took your taxreturn and we have these reports
from third parties.
And when we compared everything.

(13:23):
Which takes them two or threeyears to do.
We found a discrepancy.
So we're gonna automaticallyjump to the worst case scenario
and think you just intentionallydidn't report this income, so
now we're gonna propose anadditional tax against against
you.
So.
Being proactive with justreviewing what's being reported

(13:44):
in your name and associated withyour social security number can
shortcut a lot of headaches andproblems in the future.

Stoy Hall, CFP® (13:53):
Absolutely.

Morgan Anderson (13:54):
Second thing is be proactive.
When you move, make sureabsolutely everybody you can
think of that has any reason tobe communicating with you, has
your new contact information.
Part of the problem is I can, Ican guarantee in hindsight my
client has agreed to this, thatthey probably didn't do their

(14:14):
due diligence with making surethat account administrator had
their new address.
Yeah.

Stoy Hall, CFP® (14:20):
So, which probably would've solved all
these issues.
So at the end of the day,technically still on them,
however right, are still thingsthat happened that shouldn't
have happened.
There's a lot of, a lot ofthings in place that happened
that should never have let thishappen to Totally

Morgan Anderson (14:34):
agree.
Totally agree.
And the last thing is you hadsaid, Stoy, if you get some type
of scary, hairy, three eyedmonster notice from any of the
tax agencies about anything, getin touch with somebody to help.
You may not have to do anythingbeyond submit a simple response
to clarify a misunderstanding,but if you don't reply, they're

(14:57):
gonna always assume the worst.
They're always going to err ontheir side.
Whatever benefits them versuswhat benefits you.

Stoy Hall, CFP® (15:07):
And I will leave it with this too.
Also, everyone's like, well, whyif the IRS or the, if the
government already knows exactlyhow much I made, why don't they
just do it?
This, this is why.
These are reasons why.
Yeah.
No, no, no.
These are reasons why you needto have a professional do it
because.
Yeah, these situations happen.

Morgan Anderson (15:22):
Absolutely.

Stoy Hall, CFP® (15:23):
Absolutely.
With that though, MerryChristmas to your client.
Merry Christmas to heard thestory and the good outcome that
came up of it.
Um, do think about the holidays.
I'm glad we talked about this.
Definitely now, because guesswhat, it's tax season everybody.
It's here.
It's time to review, it's timeto get ready, um, as we go into
the new year.
So Morgan, I appreciate yourtime.
Um, thank you especially for,for that client'cause.

Morgan Anderson (15:45):
Ooh.

Stoy Hall, CFP® (15:46):
That was a, that was a doozy.

Morgan Anderson (15:47):
I know.
I know.
It was so tough, but dang.
Like I said, it had a bow on topof it at the end, right?

Stoy Hall, CFP® (15:55):
It did.

Morgan Anderson (15:56):
Thanks so much for having Meto.
I really appreciate being a partof you and your mission on
helping everybody kind ofrelieve anxiety and fear when it
comes to everything financial.
So I think you'd be

Stoy Hall, CFP® (16:08):
part of it.

Morgan Anderson (16:09):
Thank you.