60 days rollover and 1099R
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Returning Member

60 days rollover and 1099R

I received a 1099-R from my previous employer's 401k plan due to a defaulted loan balance. How do I enter a 60 days rollover in the tax form? It is not asking me anything about what I did with the money. The distribution code was 1L.

2 Replies
Level 15

60 days rollover and 1099R

I don't understand what you have to rollover?

 

A code "1L" is a "deemed" distribution that means that the proceeds from the distribution were used to pay the defaulted loan.   You did  not receive anything to be rolled over.  You could not do anything with the money that paid the loan since you never received it.

 

It is still taxable income to you, though and also subject to the 10% early distribution penalty.

 

(If you were thinking about the provision to be able to replace the amount form other funds and roll that to an IRA, then that only applies to loans that were paid from the 401(k) because you left employment with the company what sponsored the plan and the loan was  not in default.  The 1090-R box 7 would be code "1M" in that case.)

**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.**
Returning Member

60 days rollover and 1099R

As per the tax cut and jobs act, if I default on my 401K loan due to termination of my employment, then I have an option to roll over the entire amount to an IRA account to avoid the tax consequences. In my case, the 401k company created an offset on my account. So technically they distributed the loan amount to me. Since the distribution took place in 2019 when that tax cut and jobs act law is applicable, I have an option to put my offset amount into a qualified IRA by the tax filing dates with extensions. 

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