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

If this hit home, drop a comment. Tell me where you're feeling it most. I read every single one.

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Transcript

How a $90K Investment Turned Into a $196K Problem

Stoy Hall, CFP® 0:10

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 how to affect you specifically if one is erroneous or not. Ooh, that should, that's more like spooky music. Should, it shouldn't be Christmas music, but hey, this is where we're at, Morgan's back on, uh, and we're going to dive into that. So, Morgan, without further ado, why don't you, why don't you download us on the, the whole situation and, uh, everything.

Morgan Anderson 0:38

Okay. Uh, kick your feet up for a second. I'm gonna tell you a tail. It does start off a little bit like a Halloween type tail because it's a little scary, but we have some Christmas tidings at the end. So, had a client in tax year 2019, an account administrator for an investment fund issued a 10 99 R that was erroneous. Okay? This led the IS. To assessing additional tax against my client and then capturing a massive refund that was rightfully due. So here's the backstory. In 2015, we had a client who invested $90,000 into an investment fund. The fund closed in August of 17 with a profit of $16,000. Then those funds were reinvested in February of 18 into a different investment fund in April of 19. Hope y'all are keeping track on this timeline. The account administrator, the the record keeper for my client's monies in these accounts. Resigned their position because my client had moved, wasn't keeping track of everything, and the credit card they had on record with the account administrator expired. So there was no way for this company to keep charging the fees for the oversight, and they resigned from the account and my client just wasn't paying attention. Right. They deal with pretty high dollar transactions and just. Outta sight outta

When the Account Administrator Walks Away

Morgan Anderson 2:10

mind moved. Didn't even think about it. The account administrator then issued a 10 99 R for $196,000. Now the 10 99 R included not just the original $90,000 investment and the profit earned from that first. Fund when it closed, but then also added on top of it the investment into the second count. So it created this 196,000, and this company said, you know what? We're not in charge of this account anymore for this taxpayer. We wash our hands of it. Here's a 10 99 IRS. For $196,000 that this taxpayer received now 10 99 R story. Do you wanna fill 'em in on what those are? I mean, I don't even know

Stoy Hall, CFP® 2:58

all of that much. Right. Um, my recollection of a 10 99 R is a 10 99 in terms of retirement distributions.

Morgan Anderson 3:06

It is a distribution. It's a distribution from pensions, retirement funds, annuities, IRAs. So essentially what

The Bogus 1099-R That Started It All

Morgan Anderson 3:15

this account administrator did was said to the IRS, all of these positive financial transactions. We've overseen. We're just lumping it all together and reporting to the IRS in this taxpayer's social security number and name that they had 196,000 in transactions that have essentially been distributed to them. So not only were there numbers. Wrong, but the money never left the fund. It was just the account administrator stopped being involved. Right. So Skeezy, right.

Stoy Hall, CFP® 3:48

Skeezy. Was it in a retirement fund too? Pardon? Was it an actual retirement fund though? No, it was just an investment fund on top of all of it. Yep. Yep.

Morgan Anderson 3:58

So. Taxpayers that, pardon? There's so many layers

Stoy Hall, CFP® 4:04

to this.

Morgan Anderson 4:04

I know. So many layers to this. I mean, when I first became involved, I had to write everything out in a timeline and say, okay, I wanna make sure that I'm following this properly because this can, this seems so outlandish. So remember, the taxpayer moved right? They never received a copy of the 10 99 R that was issued in 2019 in their name. By late 2020, the fund, the second fund that they had invested all these monies into had lost a bunch of money. It closed, and the taxpayer ended up receiving 57,000 and a realizable loss of over 48,000. Okay, so in 2021, the IRS contacted my client and said, Hey look, we got this 10 99 R from this account administrator reflecting 2019 activities, and you've got $196,000 of unreported income. We're gonna propose. Adding tax

IRS Notices, Captured Refunds, and Mounting Stress

Morgan Anderson 5:02

to that year, and the client's like, wait a minute, I didn't, first of all, the money never left the fund. I never had $196,000 in it. What is going on? So he tried contacting that account administrator. And these people were so rude and they said, you know what? If you've got a problem, you need to deal with it. With the IRS. We're not fixing anything. Right? This happens more than you can imagine, which is really sad. There's just no integrity sometimes with these situations. So he con, my con client contacted the IRS and said, look, there's a problem. I never. First of all, the fund never had 196,000 in it, and second of all, never took any money out in 2019. This is wrong. Well, the IRS said, no, you gotta go back to the account administrator and fix it with them. 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 and they applied it to this debt, to this proposed additional. Well, at that point it was a. An additional tax assessment, so my clients out 116,000, had never had that much money in this fund to begin with, and is like, I, I don't even know what to do. I can't get the IRS to help. I can't get this account administrator to fix their error. He tries a couple more times, rounds between the two. Can't get anything done. Finally reaches out to us in December of 23. And like I said, I had to write down the whole timeline so I could make sure I understood it correctly. But he was right. This 10 99 R should have never been issued and it never should have been issued for the original investment, the profit earned on that original investment, and then the reinvestment into the second fund of those same monies. Right. So we knew we were dealing with like. Taxpayer Bill of Rights issue. One

Building the Case: Timelines, Proof, and Taxpayer Rights

Morgan Anderson 7:08

of the taxpayer Bill of Rights that the IRS acknowledges, you can look it up on their website, is you have the right to pay no more than the correct amount of tax that you should justifiably owe. Okay? So we knew this client's taxpayer rights had just been trampled on all over the place. So we submit a request to the IRS 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 proctored the in the fund, the founder and and manager of it. He ended up writing a letter saying, Hey, this taxpayer never withdrew money in 2019. We don't know what happened with this company, but we can attest. To the fact that no monies were ever withdrawn. We had copies of statements showing, no, no movement of monies in 2019. So we submit that in January of 24 with like 45 pages of supporting documentation, and then we start receiving notices from the IRS saying, oh, we got your correspondence. We need 90 days to look at it. We got five rounds of those. We'd wait 90 days, then get another one, and then wait 90 days and then get another one. And meanwhile, we're calling the IRS. The case was being handled in Fresno and they said, yes, we see it here. We're just waiting for somebody to handle it. And when we got our fifth 90 day notice letter, I said, this is enough. We contacted the taxpayer advocate, got them involved, and from July to September of 2025, I had four conversation with the advocate. She went through everything she put on armor, went to bat with, um, the Fresno office for our client's. Uh, interest ended up not only getting the $116,000 back to him, but also over. $30,000 in interest. So that's why I say it's a Christmas story. Right. Even though the IRS had 116,000 of my client's money tied up for almost two years, we ended up getting interest paid on all that money,

Stoy Hall, CFP® 9:12

first of all, the layers to this story. I

Morgan Anderson 9:14

know, right?

Stoy Hall, CFP® 9:17

Like this is the. There's a movie about this, right? What? What's crazy? I, I guess the part that I took out the most, I mean, not the most, the thing that I didn't think was gonna happen at the end of this story was the fact that you also got interest. Mm-hmm. Because that's one thing that. The IRS and the government are really good at doing is not applying any interest back to you when they're at fault. I know. So I love that part of the whole story, but yeah. Holy crap. So let's, let's walk through this a little bit.

Morgan Anderson 9:43

I know, I know. That was a whole,

Calling in the Taxpayer Advocate and Going to Battle

Morgan Anderson 9:45

that was a mouthful, wasn't it? Client,

Stoy Hall, CFP® 9:47

client invests in a fund in, in what? Probably 20 18,

Morgan Anderson 9:52

20 15. It was $90,000.

Stoy Hall, CFP® 9:55

So invest it does what it does. They, they obviously have administrator of it. Mm-hmm. In 2019 or before the, the payment ceases 'cause he moves, loses sight outta sight item. Mine situation, 2019 they say Screw it, we're done with it. So instead of us putting it on our books, we're just going submit a 10 99 R, 10 99 R, get it out of here and not deal with it. Leaving him with now a giant tax bill come. When the IRS finally found it in 2021 of 116,000, right?

Morgan Anderson 10:28

Correct. Well, no, they had said, so the tax was 116,000. The account administrator reported 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 when he, 20, 20, 24 years, four years of, of stress. Out of, uh, out of all his money. 'cause it's no longer to be there. Right. Um, going back and forth five rounds at 90 days is stressful enough. I'm sure he got many other notices that the IRS automatically spits out. Anyway, that terrifies everybody. Absolutely. Get you involved in when you guys are involved. Still not a lot of movement happening. Luckily we had a advocate decide to put the armor on and do their job, which is amazing.

Morgan Anderson 11:14

Yeah. And which is, which is an anomaly right now because they're so overwhelmed with the inefficiencies 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, mistakes happen. Yes. But when you receive a notice in general from the IRSA 90 day or a 60 day, or scream out top of lungs that you owe this much, typically those are just, I don't wanna call 'em scare tactics because they don't necessarily do it on purpose, but they're scare tactics, right? Mm-hmm. They're to get you to act and to move immediately, and usually you'll make a mistake out of fear if he wasn't intelligent enough. To understand that and to just let it happen. We're talking 106, $146,000 that now he has that he didn't have before. Right, right. And I wanna summarize that of people do not be afraid, take it to somebody. Those notices, those letters are not always accurate, mostly are just automatically generated because something popped. Correct. Human has not reviewed them. Correct. Hence the 90 days. 'cause they're waiting because they're understaffed and government shut down and you name all the things, uh, all the things into that. And so I want, I want to take that from it, but

Winning Back $116K Plus Interest

Stoy Hall, CFP® 12:28

what did your client take from this process and scenario?

Morgan Anderson 12:32

So one of the things is to be proactive with checking the third party reports on your behalf. Every year, so all of us can access our tax account on the IRS's website and pull records, they call it the wage and income transcript. You can pull that to see what has been reported in your name tied to your social security number. So

Stoy Hall, CFP® 13:00

right simple.

Morgan Anderson 13:01

Yes. So simple to do. But it is you being proactive and and owning what's being reported in your name. If you do that, you're gonna stay ahead of any type of situation like this where the IRS says, Hey, we got reports. You know, we took your tax return and we have these reports from third parties. And when we compared everything. Which takes them two or three years to do. We found a discrepancy. So we're gonna automatically jump to the worst case scenario and think you just intentionally didn't report this income, so now we're gonna propose an additional tax against against you. So. Being proactive with just reviewing what's being reported in your name and associated with your social security number can shortcut a lot of headaches and problems in the future.

Stoy Hall, CFP® 13:53

Absolutely.

Morgan Anderson 13:54

Second thing is be proactive. When you move, make sure absolutely everybody you can think of that has any reason to be communicating with you, has your new contact information. Part of the problem is I can, I can guarantee in hindsight my client has agreed to this, that they probably didn't do their due diligence with making sure that 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 things that happened that shouldn't have happened. There's a lot of, a lot of things in place that happened that should never have let this happen to Totally

Morgan Anderson 14:34

agree. Totally

How to Check What’s Reported Under Your SSN

Morgan Anderson 14:35

agree. And the last thing is you had said, Stoy, if you get some type of scary, hairy, three eyed monster notice from any of the tax agencies about anything, get in touch with somebody to help. You may not have to do anything beyond submit a simple response to clarify a misunderstanding, but if you don't reply, they're gonna always assume the worst. They're always going to err on their side. Whatever benefits them versus what benefits you.

Stoy Hall, CFP® 15:07

And I will leave it with this too. Also, everyone's like, well, why if the IRS or the, if the government already knows exactly how 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 need to have a professional do it because. Yeah, these situations happen.

Morgan Anderson 15:22

Absolutely.

Stoy Hall, CFP® 15:23

Absolutely. With that though, Merry Christmas to your client. Merry Christmas to heard the story 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 guess what, it's tax season everybody. It's here. It's time to review, it's time to get ready, um, as we go into the new year. So Morgan, I appreciate your time. 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 top of 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 part of you and your mission on helping everybody kind of relieve 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

What This Means for You Before Tax Season Hits

Morgan Anderson 16:10

you.