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Subject Author Date
Not understanding 1099R, 401K loan Turborob 04-14-2008
Posted by Mark Bole on April 19, 2008, 12:58 pm
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 removeps-groups@yahoo.com wrote:
>
>> That is what they claim, but why would unpaid interest be deemed a
>> distribution? I understand paying the tax and penalty on money I
>> withdrew since tax was never paid on it previously, but accrued
>> interest isnotmoney that I ever received. I just don't understand
>> it I guess. So the benefits company screws up, doesn't issue the 1099
>> in the correct year, adds a bunch of interest to the loan and I wind
>> up with a larger tax burden...there just isn't any logic there.

One option is to amend your 2005 tax return to reflect the distribution
as it should have been reported at that time, and then attach a
statement to your 2007 return explaining that the 1099-R was previously
accounted for.

However, you would then have a two-year-overdue tax payment to the IRS
for 2005 which would be subject to interest. Having a two-year grace
period on paying your full tax, and avoiding amendments and attachments,
might be sufficient to overcome the extra tax and penalty on the accrued
interest.

-Mark Bole

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Posted by removeps-groups@yahoo.com on April 20, 2008, 2:00 pm
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> One option is to amend your 2005 tax return to reflect the distribution
> as it should have been reported at that time, and then attach a
> statement to your 2007 return explaining that the 1099-R was previously
> accounted for.

But if he never received this 1k interest why should he pay taxes on
it?

To original poster: Where is the 1k now? Is it still in the account,
but maybe bigger now? Try to look at your monthly, quarterly, or
annual statements over the years to track where this 1k is.


> However, you would then have a two-year-overdue tax payment to the IRS
> for 2005 which would be subject to interest. Having a two-year grace
> period on paying your full tax, and avoiding amendments and attachments,
> might be sufficient to overcome the extra tax and penalty on the accrued
> interest.

Sorry, I don't understand.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Mark Bole on April 21, 2008, 12:05 pm
Please log in for more thread options
removeps-groups@yahoo.com wrote:
>
>> One option is to amend your 2005 tax return to reflect the distribution
>> as it should have been reported at that time, and then attach a
>> statement to your 2007 return explaining that the 1099-R was previously
>> accounted for.
>
> But if he never received this 1k interest why should he pay taxes on
> it?

If he amends the 2005 return to reflect what the outstanding loan
balance was at that time, he won't.

>
> To original poster: Where is the 1k now? Is it still in the account,
> but maybe bigger now? Try to look at your monthly, quarterly, or
> annual statements over the years to track where this 1k is.

I assume he has not been continuing loan payments after he left the job.
The interest is accrued, not actually paid.


>> However, you would then have a two-year-overdue tax payment to the IRS
>> for 2005 which would be subject to interest. Having a two-year grace
>> period on paying your full tax, and avoiding amendments and attachments,
>> might be sufficient to overcome the extra tax and penalty on the accrued
>> interest.
>
> Sorry, I don't understand.

He says his former employer screwed up by issuing the 1099-R two years
late. So, if they had issued it on time, for tax year 2005, he would
have paid tax and early distribution penalty on or before mid-April
2006. It's now two years later, he still hasn't paid any tax. Sounds
like a deal to me!

-Mark Bole




--
Mark Bole

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

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