Question

1099R code 1M no penalty?

Forum|Forum|5 years ago
February 23, 2021
3 replies
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I received a 1099R for a qualified loan offset (code 1M and 0.00 in box 2a)

we entered all the information as requested in turbo tax and talked to one of the experts before filing, who said the amount in box 1 was added to our AGI but that no penalty was assessed. I was confused because it was my understanding that unless I rolled over the money I borrowed (it was a smaller amount <$2000) we would pay a penalty and taxes, and we were ready to do so. Now I read somewhere I could also rollover the amount to a qualified plan before April 15th (since distribution took place in 2020.) Do I still have time to do so even though I already filed my taxes? The expert just said I didn’t have to pay a penalty but I’m just confused. Would the penalty be assessed next year if I hadn’t rolled over the amount from box 1?

Not A Product Question

M

MAK70

There should be a penalty for early withdrawal unless an exception applies. You are able to rollover the amount by the due date of the taxes.

A plan may provide that if a loan is not repaid, your account balance is reduced, or offset, by the unpaid portion of the loan. The unpaid balance of the loan that reduces your account balance is the plan loan offset amount. A plan loan offset amount is treated as an actual distribution for rollover purposes and may be eligible for rollover. If eligible, the offset amount can be rolled over to an eligible retirement plan. Effective January 1, 2018, if the plan loan offset is due to plan termination or severance from employment, instead of the usual 60-day rollover period, you have until the due date, including extensions, for filing the Federal income tax return for the taxable year in which the offset occurs.

Y

Yaya451Author

What do I do if I already filed my taxes? Do I still have April 15th to rollover the balance? Do I do an amended return to try and calculate the penalty? I’m just so confused because we answered every question right and entered the information as requested and even got someone online who confirmed we were not being charged a penalty.

macuser_22

Employee

Yes, if you can come up with the money by the due date or extended due date (Oct 15) to roll it into a IRA then there is NO tax or penalty whatsoever. (If you already filed then an extension is not necessary for the extended Oct 15 date to apply).

On an amended return you just delete any 1099-R already entered and enter the code 1M 1099-R and say that all of the money was rolled over.

See User dmerts's answers in this thread.

https://ttlc.intuit.com/community/retirement/discussion/on-my-1099r-i-have-a-1m-in-box-7-what-does-that-mean/00/147948

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

macuser_22

Employee

A code 1M is fully taxable UNLESS you use other funds to roll that money into a retirement account by the due date of the tax return. Then you report is as a non-taxable rollover.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

D

dmertz

Employee

$0 in box 2a seems wrong unless the Form 1099-R has an amount in box 5 equal to the amount in box 1, which seems really unlikely. Is box 2b Taxable amount not determined marked?

The deadline for completing the rollover of a qualified offset distribution is the due of your tax return, including extensions. Filing by the April 15 deadline would give you until October 15 to complete the rollover pursuant to section 301.9100-2 and file an amended tax return.

Y

Yaya451Author

@dmertz The amount in box 1 is equal to box 5

D

dmertz

Employee

Since the amount in box 5 is equal to the amount in box 1, this distribution is nontaxable. Since it's nontaxable, it's also not subject to an early-distribution penalty.