dmertz
Level 15

Retirement tax questions

If the distribution was an offset distribution (code M included in box 7), the loan was paid off by the distribution and there is no longer a loan to repay.  All you can do is roll over the distribution by the due date of your tax return, including extensions, to avoid the immediate tax consequences of the distribution by returning the money to a retirement account.

 

If the distribution was a deemed distribution (code L included in box 7), the loan is still outstanding and must be repaid.  The amount becomes unconditionally taxable and the loan still must be repaid.  However, because taxes have already been paid on this money, the repayments become after-tax basis in the plan that will not be taxed again when later distributed.  There is no particular deadline for paying off the loan.

 

Whatever you do in either case does not change the reporting required to be made by the plan on the Form 1099-R.  In the case of the offset distribution, the rollover only affect how you report that Form 1099-R on your tax return.