8915-F Different Situation?

[pack9001]

Not sure if this a different situation than others, but I took a 401k loan right at the beginning of the pandemic in 03/2020 when rumblings were starting to happen about the shutdowns. I was then put on furlough with my job. I did make payments on the loan for a while as I was getting paid a small portion of my salary. 

I was then let go completely in August 2020 and stopped making payments on the loan. Even when I started working again (for a different company), I did not rollover the loan into a new account.

Thus, the loan defaulted and became a full distribution in 2021.

I received my 1099-R today - can this still qualify as a Disaster Distribution at which point I will need the form 8915-F if I wanted to defer the tax hit on this? Box 7 shows 1M as the code.

Thanks in advance.

[macuser_22]

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@pack9001 wrote:

Not sure if this a different situation than others, but I took a 401k loan right at the beginning of the pandemic in 03/2020 when rumblings were starting to happen about the shutdowns. I was then put on furlough with my job. I did make payments on the loan for a while as I was getting paid a small portion of my salary. 

I was then let go completely in August 2020 and stopped making payments on the loan. Even when I started working again (for a different company), I did not rollover the loan into a new account.

Thus, the loan defaulted and became a full distribution in 2021.

I received my 1099-R today - can this still qualify as a Disaster Distribution at which point I will need the form 8915-F if I wanted to defer the tax hit on this? Box 7 shows 1M as the code.

Thanks in advance.

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No.    Loans were excluded from Disaster Distributions.    The code 1M means the loan was paid off from the funds in th account and you have until the due date of the 2021 tax return or extended due date if you file an extension to replace that money in the account using other funds.    It would be considered a rollover.

[pack9001]

Thank you for the reply.

I am not planning to pay back the amount of the loan.

So does this become a normal disbursement, with no tax relief via the Disaster Recovery laws? I took the loan specifically because we had a feeling I was going to be either furloughed or let go.

[macuser_22]

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@pack9001 wrote:

Thank you for the reply.

I am not planning to pay back the amount of the loan.

So does this become a normal disbursement, with no tax relief via the Disaster Recovery laws? I took the loan specifically because we had a feeling I was going to be either furloughed or let go.

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Yes, it is a taxable distribution that went to pay the loan.   It does not matter whether you took a normal distribution yourself and used the money to repay the loan or they took it.