@malligator wrote:
I've done some more digging and I found a post that, coincidentally, came from you last May.
"Code M & L are almost the same - it means that money was taken from the retirement plan to pay the loan. Code M means that the reason was that you left employment with the company, and code L means that you defaulted on the loan but were still employed."
I was laid off from the company due to COVID so shouldn't my distribution code be M instead of L? If I change my 1099 in TT to M it does, in fact, remove the 10% penalty and allow me amortize the taxes.
The only difference is a code M gives you to the due date (or extended due date) of the return to roll a like amount of money from other funds to a Traditional IRA.
Code M applies to a termination, it is not clear if it would apply to a layoff. If you want the code M treatment contact the plan administrator to see if it might apply and issue a corrected 1099-R.
If you do not want to replace the money from other funds and roll to a IRA then the treatment is the same as a code L, but it might let you pay the tax over 3 years.
**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.**
