QPLO

My employment was severed in February 2021 with my employer with an outstanding loan. I rolled over my retirement to a qualified IRA. I received a 1099-R that indicated the amount with code M1 in box 7. I repaid the total amount in February 2022, prior to filing my 2021 taxes. When my taxes were filed this was listed as taxable, but I was  under the impression this would qualify as a QPLO and since the full amount was paid, would not be taxable income. I am wondering if my taxes should be amended to not include this as taxable income? 

After you file

Did you look at the form 1040 lines 5a & 5b ... the entire distribution will be listed on line 5a and the taxable portion on line 5b.  The summary in the program only shows 5a which can be confusing  ...  so if the return is incorrect  amending it would be the way to go.  

After you file

What do you mean, you "repaid" the offset.  Did you make a new contribution to the IRA and take a tax deduction for it, or did you make a deposit to the IRA and tell them in advance this was a rollover of an offset distribution?  (This would not be tax deductible, either.)

 

If you made a tax deductible contribution to the IRA, then you did it wrong.  You have a taxable loan offset and a tax deductible contribution.  I would have to research to see if this is a correctable error.

 

If you made a rollover contribution to the IRA, then you did it correctly, but you might have reported it incorrectly in Turbotax, in which case you need to file an amended return to get the tax back.  Check line 5b as indicated.  Also, if you are under age 55 and the offset was treated as taxable, you would have a penalty calculated on form 5329.  That form should not be included with your return if you made a rollover contribution and reported it correctly.  

After you file

Thank you for your response.  I made a rollover contribution to my IRA for the full amount of the loan (almost $18K).  Nothing is listed in 5b on my 1040. 

After you file


@Crystaln777 wrote:

Thank you for your response.  I made a rollover contribution to my IRA for the full amount of the loan (almost $18K).  Nothing is listed in 5b on my 1040. 


If line 5b is blank, then you didn't pay tax on the distribution (the rollover was correctly accounted for).  Do you still have concerns that you paid too much tax?