Hi, I opened and funded an IRA account, then changed my mind a week later and withdrew the funds and closed the account before filing my return; there was one dollar in interest. I did not claim the deduction, so there should be no penalty or taxes due on the distribution. I received a form 1099-R from my bank which says the full distribution is taxable. How would I show on my return that this distribution was in fact allowed? Do I need a revised form from my bank? How should I treat the one dollar in interest (I assume that since the IRA arrangement was canceled, it should be taxed at the regular rate.)

“Hi, I opened and funded an IRA account, then changed my mind a week later and withdrew the funds and closed the account before filing my return; there was one dollar in interest. I did not claim the deduction, so there should be no penalty or taxes due on the distribution. “----->I assume that your IRS is traditional IRS., then, as long as you put money into your IRA but then decide you need it back, you can generally "take back"the contribution made to a traditional IRA without paying tax, as long as you do it before the tax filing deadline of that year and do not deduct the contribution from your taxes. Be sure you carefully read all the information pertaining to your IRA, especially anything you received while setting up the account.
“I received a form 1099-R from my bank which says the full distribution is taxable. How would I show on my return that this distribution was in fact allowed?”----->I gguess you need to contact your plan administrator. Receiving an incorrect Form 1099-R is frustrating, as the errors can result more taxes due on your return than you owe or an underpayment of tax, leaving you open to penalties. Form 1099-R is used to report distributions you received from various plans, including pension, retirement and insurance contracts, to you and the IRS. You must include 1099-R figures on your income tax return. You can dispute a 1099-R and still file your taxes on time by contacting the payer on the form and asking for help from the IRS. (For reference, all IRA distributions must be reported on your taxes. When you take a distribution, your bank will send you a form 1099-R that breaks down how much of your distribution is taxable and how much is not subject to income taxes; If you are taking an early distribution, you must use Form 1040. (You need to complete Form 5329 to determine the amount of the early withdrawal penalty you owe if you are taking an early distribution. The amount of the penalty must be reported on line 58 of Form 1040.). You should report the amount of your nontaxable IRA withdrawal on line 15a of Form 1040. This amount will not be included in your taxable income, but must be reported for IRS record keeping.You also need to report the taxable portion of your IRA withdrawal on line 15b of Form 1040. This amount will be included in your taxable income.)
“ Do I need a revised form from my bank? How should I treat the one dollar in interest (I assume that since the IRA arrangement was canceled, it should be taxed at the regular rate.)”-----> All IRAs hold tax-sheltered account status which means that the interest earned on the money in the account is tax-free at least as long as the money remains in the account. Interest earnings/ contributions to the traditional IRA must be recorded as taxable income on your tax return in the year that you take the money out of the account.

Thanks for the reply. I was thinking, that from the bank's perspective, how do they know that I didn't in fact claim the IRA deduction and that my withdrawal isn't subject to taxes and penalties? Why would they issue a revised form?

“I was thinking, that from the bank's perspective, how do they know that I didn't in fact claim the IRA deduction and that my withdrawal isn't subject to taxes and penalties? Why would they issue a revised form?”---> The IRS requires firms to issue a Form 1099-R if you took more than $10 in distributions from your retirement plan, IRA, etc.I guess you need to call or write a letter to the firm that holds your account. Instruct that firm to close the account after all of your assets have either transferred out or withdrawn and ask the firm to send some type of confirmation, such as a final statement or a formal letter, that shows your account as officially closed.