L1 and M1 distribution codes on 1099R
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New Member

L1 and M1 distribution codes on 1099R

I left a job in 2018 with an outstanding loan from my 401k. I received a 1099R for my 2018 taxes with and M1 distribution code. I included it on my 2018 taxes, paid the income taxes, and the additional 10% early withdrawal penalty. I then received a 2019 1099R with a distribution of L1 for the same loan. When I enter in Turbo Tax, income tax and early withdrawal penalty are applied again. I know I don't have to pay taxes and penalties twice. Did I receive the 2019 1099R in error or am I entering the information incorrectly?

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Level 15

L1 and M1 distribution codes on 1099R

That really does not make sense.     Were you still employed by the company in 2018 when you received the code M1?

 

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.

 

Are you sure that the code L is not a corrected 1099-R and the code M was issued in error?     You would not be paying the same loan twice.    Call the plan administrator  for an explanation.

**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.**
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Level 15

L1 and M1 distribution codes on 1099R

I agree, there should have been no code L1 2019 Form 1099-R since the loan was satisfied by the 2018 offset distribution reported on the code M1 2018 Form 1099-R and you had no loan in 2019 on which you could have defaulted in 2019.  You need to obtain a corrected code L1 2019 Form 1099-R from the payer showing $0 distributed.

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