I am curious as to how other shops handle defaulted loans in the balance forward world. For example, how do you handle a loan that is made in December, 2002 and payments are made through March, 2003. The loan would be in default and would become a deemed distribution as of 6/30/03. In most cases you would not get any information until February or March of 2004. How would you handle the 1099s?

Been there. Done that. Issue them when you know about them. Never seen any late fees applied for being late. There was a period there where late fees for 1099's were the same as 5500's. Something like $25/day up to $15,000. Ridiculous. Now, the penalty is supposedly $50/form, but that can be waived if there is reasonable cause, and I'm pretty sure this would qualify as reasonable cause to anyone except the truly hard-hearted.