cancel
Showing results for 
Search instead for 
Did you mean: 
Highlighted
Level 2

401k loan rollover - What happens if you have to re-file to correct a mistake?

Hello,

 

If one had a 401k loan with their previous company and quit that job, the loan becomes due. Per the Tax Cuts and Jobs act of 2017, you have until your taxes are due for that tax year to roll over the loan balance into an eligible account to avoid paying income taxes and early-withdrawal penalty. So this means April 15th by default and October 15th if you file an extension.

 

Given that information, what would happen if you left the company in December, then filed your taxes in February (mentioning nothing about the loan distribution), received a refund, then some time later you got a 1099-R about the offset/distribution?

 

Can you still roll over the loan balance into an eligible retirement account, re-file a correction and still avoid the major taxation on the balance of the loan?

 

If so, how long would you have? April 15th, or longer? Or once you file at all (even incorrectly) your ability to claim the rollover is off the table?

1 Best answer

Accepted Solutions
Highlighted
Level 15

401k loan rollover - What happens if you have to re-file to correct a mistake?


@mitsuhide wrote:

So I guess you have until October 15th to actually perform the rollover (place funds into an eligible account). 

 

So even if I received the 1099-R on time to file my taxes, if I was due a refund this year (ignoring the 401k distribution for a moment), I could file and note down the distribution, note down the rollover, receive my refund, and not actually have to fund the rollover account until the deadline?


Not legally.  If you had timely received the 1099-R prior to filing then it must be part of your tax return or your tax return would not be accurate and complete to the best of your knowledge under penalty of perjury.   You would either have to pay the tax with the tax return or fund the rollover so that it could be accurately and truthfully reported.  If you paid the tax and later come up with other funds to complete the rollover (before the Oct 15 extended due date) then you could amend for a refund of the taxes paid.

 

Of course you could just pay any (other) tax due by the July 15 due date and file an extension before July 15 so that you could put off filing until Oct 15.  If you knew that you would fund the rollover then the tax paid by July 15 would not need to include the rollover amount.

 

[Edited 03/24/20 to reflect IRS and state extended due dates]

**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.**

View solution in original post

3 Replies
Highlighted
Level 15

401k loan rollover - What happens if you have to re-file to correct a mistake?

Yes you must amend to report the 1099-R.

 

I assume that the box 7 code is an "M" or "M1"?

 

You would either have to pay the tax owed or rollover the box 1 amount to a Traditional IRA by replacing that money with other funds.   You have until the extended due date (Oct 15, 2020) to do that.

 

 

**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.**
Highlighted
Level 2

401k loan rollover - What happens if you have to re-file to correct a mistake?

So I guess you have until October 15th to actually perform the rollover (place funds into an eligible account). 

 

So even if I received the 1099-R on time to file my taxes, if I was due a refund this year (ignoring the 401k distribution for a moment), I could file and note down the distribution, note down the rollover, receive my refund, and not actually have to fund the rollover account until the deadline?

Highlighted
Level 15

401k loan rollover - What happens if you have to re-file to correct a mistake?


@mitsuhide wrote:

So I guess you have until October 15th to actually perform the rollover (place funds into an eligible account). 

 

So even if I received the 1099-R on time to file my taxes, if I was due a refund this year (ignoring the 401k distribution for a moment), I could file and note down the distribution, note down the rollover, receive my refund, and not actually have to fund the rollover account until the deadline?


Not legally.  If you had timely received the 1099-R prior to filing then it must be part of your tax return or your tax return would not be accurate and complete to the best of your knowledge under penalty of perjury.   You would either have to pay the tax with the tax return or fund the rollover so that it could be accurately and truthfully reported.  If you paid the tax and later come up with other funds to complete the rollover (before the Oct 15 extended due date) then you could amend for a refund of the taxes paid.

 

Of course you could just pay any (other) tax due by the July 15 due date and file an extension before July 15 so that you could put off filing until Oct 15.  If you knew that you would fund the rollover then the tax paid by July 15 would not need to include the rollover amount.

 

[Edited 03/24/20 to reflect IRS and state extended due dates]

**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.**

View solution in original post