L1 and M1 distribution codes on 1099R

Forum|Forum|6 years ago
May 5, 2020
1 reply
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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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macuser_22

Alumni - Champ

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.**

dmertz

Level 15

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.