401(k) rollover not rolled

What is the name of your state? WV

My husband received a distribution check from his (former) 401(k) made payable to our local bank as trustee FBO his name. Unbeknownst to me the funds were deposited into his checking account, not into an IRA rollover, and spent on big boy toys.

My question-- Our account prepared our taxes based on the assumption that the rollover was completed. We filed our joint tax return about 2 1/2 weeks ago. ( The 1099 my husband received for the 401(k) distribution listed it as a 'rollover', so when the IRS matches documents it will appear to be correct)

But I want to correct this. How do we go about doing this? My husband just fessed up, so I can't call our accountant until Monday and I would like to know if there be any additional penalties (other than the 10% for pre-mature distribution) or worse.

Thank you for your advice.

Tell your accountant that the 1099 is incorrect, which means you will need to get a corrected one and then have your return amended. There will be penalties for an early distribution. It's a good thing that your husband "fessed up". Knowingly filing a fraudulent return would have been costly.