Trying to get a start on my taxes and ran into a snag.
I was employed by Company (A) up until 2018 when I was fired. I had a 401k in it that I contributed to regularly from my paycheck. A year or so prior I had taken a loan out against it (at the time it was necessary and the repayment wasn't an issue).
I still had money left in my 401k as far as I knew. When I was terminated I didn't understand the payback options, and was under the impression the loan would be paid back from the 401k. I didn't do anything with it, but today recieved a 1099R form from them
The form says 1. Gross distribution 2250.00 2a. Taxable amount 2250
7. Distribution code(s) 1M
I plan on talking to a professional, but I'm not exactly in a great place financially, so I'm at a loss on how to handle this. Thank you for any clarification you can offer
This means that the loan has been considered a distribution subject to the early withdrawal penalty of 10%. It's probably too late to do anything about it since you mentioned this happened in 2018.
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The code M in box 7 of this 2019 Form 1099-R indicates that the offset distribution that satisfied the loan occurred in 2019 and that you have until the due date of your 2019 tax return, including extensions, to come up with the money to roll over some or all of this distribution and continue to defer this income, avoiding income tax and avoiding the 10% early-distribution penalty indicated by the code 1 also present in box 7. Any portion not rolled over will remain a taxable distribution subject to ordinary income tax and the 10% early-distribution penalty.