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Level 2
posted Mar 31, 2020 4:11:51 PM

DO I NEEDTO FILE FORM 5329 IF I RECEIVED 1099-R WITH LINE 7 SHOWING M7?

I took out a loan from my 401-K when working. After I retired, and received my 401K$, which I rolled over to an IRA, I did not pay taxes on the loan. Wondering if I just have to file form1040 or if I need to file form 5329. When I entered info in Turbotax, it wasn't showing that I need to file that form.

 

thanks

0 5 907
5 Replies
Level 15
Mar 31, 2020 4:22:12 PM

No.  There is no penalty on a 5329, but the distribution to pay the loan is taxable.    With code M, you can replace that amount as part of the rollover with other funds and roll the entire amount tax free.  You have until the due date of the return (now Jul 15) to do that (or the extended due date, Oct 15, if a timely extension is filed).

Level 2
Mar 31, 2020 4:44:22 PM

Thanks for the quick response.  Not sure what you mean by being able to replace that amount as part of the rollover with other funds and roll the entire amount tax free.  So the amount is around $16,000. I rolled other 401K $ to an IRA.

 

thanks

Level 15
Mar 31, 2020 4:54:02 PM

Level 2
Mar 31, 2020 6:46:27 PM

Thanks for the detailed explanation.  I think I understand it.  My employment ended in November 2018, I received the 1099-R form for the $16,000 loan in January 2020 for my 2019 filing. If I were to make a deposit to an IRA before the July filing deadline, would the $16,000 still be reported as income on my tax return?  I put in my TurboTax form the rollover $ I did transfer to an IRA (so that does not show as income). Right now, the $16,000 does show as income.  And, if I only deposited $5,000 in an IRA, would that partially offset the $16,000 loan, where only $11,000 would then be reported as income?

 

Thanks much for your help

 

 

 

Level 15
Mar 31, 2020 7:32:03 PM

No an IRA contribution does not offset the tax on the 1099-R.

 

Essentially it says that you can "replace" the money on the code M and treat it as a non-taxable rollover.  If you do that you must tell the IRA trustee that this is a code M rollover and NOT a IRA contribution.