File your taxes showing the distribution as a taxable pension amount. If you are under age 59-1/2 you'll also pay a 10% penalty for early withdrawal.

Here's what you might want to try -- this worked for me.

A few years ago, I did an IRA rollover and the institution mis-coded it has a regular deposit rather than a rollover. After doing a lot of searching (and a lot more worrying!) I found out the following:

A hardship exception enacted in 1991 (IRC section 408(d)(3)(I)) allows the IRS to waive the 60-day rollover period if failing to do so would be against equity or good conscience, as in cases of casualty, disaster or other events beyond a taxpayer's reasonable control. The IRS is empowered to issue guidance providing objective standards for waivers for periods during which IRA participants had received, but not yet cashed, their checks; financial institution errors; or situations in which taxpayers were unable to complete rollovers due to death, disability, hospitalization, incarceration, restrictions imposed by a foreign country or postal errors.

(Mine was a financial institution error so, it qualified.)

In revenue procedure 2003-16, the IRS explained how taxpayers can apply for a waiver of the 60-day rollover period and when a situation merits an automatic waiver.

In determining whether to grant a waiver, the service considers all relevant facts and circumstances; how taxpayers used the amount distributed (for example, for payments made by check, whether they cashed the check); and the time elapsed after the distribution. Automatic approval is granted (and, thus, no application to the IRS is needed) when a valid rollover would have been completed but for a financial institution error. In any case the distribution must have occurred after 2001.

The service has issued various letter rulings waiving the section 408(d)(3) 60-day rollover requirement and providing taxpayers with a fresh 60-day rollover period beginning on the letter ruling's date. In each case the taxpayer established that no other amount was distributed from the IRA within the one-year period after the original distribution, as required under section 408(d)(3)(B).

Clearly, the IRS is liberally applying its authority to grant waivers under the hardship exception. CPAs have an opportunity to assist clients whose circumstances qualify.

See if your bank can work with you and your CPA on getting a hardship exception under this section of the code. It worked for me. Good Luck!