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Subject Author Date
question for 1099-r gross distribution Fish 04-11-2008
Posted by Fish on April 11, 2008, 6:27 pm
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 how do explain to IRS that a loan from 401K was paid off in this
scenario

I took out a loan from 401K plan and convert the rest to IRA to the
same company who handles both plans.

I paid off the loan quickly (within 60 days to avoid tax) AFTER I
convert to IRA plan from 401K

I receive a 1099-R (distribution code 1, box 7) that the loan amount
is taxable from my former 401K plan (even it was paid off long ago)

----

How I deal with 1099-R form, and tell IRS it is not subjected to tax
or penalty? is there any form I can use or I need to write them a
letter?

How to deal with line 15a and 15b on 1040?

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Posted by joetaxpayer on April 11, 2008, 6:44 pm
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 Fish wrote:
> how do explain to IRS that a loan from 401K was paid off in this
> scenario
>
> I took out a loan from 401K plan and convert the rest to IRA to the
> same company who handles both plans.
>
> I paid off the loan quickly (within 60 days to avoid tax) AFTER I
> convert to IRA plan from 401K
>
> I receive a 1099-R (distribution code 1, box 7) that the loan amount
> is taxable from my former 401K plan (even it was paid off long ago)
>
> ----
>
> How I deal with 1099-R form, and tell IRS it is not subjected to tax
> or penalty? is there any form I can use or I need to write them a
> letter?
>
> How to deal with line 15a and 15b on 1040?

Want to offer the timeline, a bit slower? Maybe with dates and $$ ?
You say you 'paid off' the loan? Back to the 401(k), I take it? The
1099R should only be the amount transfered and you show it rolled over
on your 1040.

Joe
www.blog.joetaxpayer.com

--
<< ------------------------------------------------------- >>
<< 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 Fish on April 12, 2008, 11:45 am
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> Fish wrote:
> > how do explain to IRS that a loan from 401K was paid off in this
> > scenario
>
> > I took out a loan from 401K plan and convert the rest to IRA to the
> > same company who handles both plans.
>
> > I paid off the loan quickly (within 60 days to avoid tax) AFTER I
> > convert to IRA plan from 401K
>
> > I receive a 1099-R (distribution code 1, box 7) that the loan amount
> > is taxable from my former 401K plan (even it was paid off long ago)
>
> > ----
>
> > How I deal with 1099-R form, and tell IRS it is not subjected to tax
> > or penalty? is there any form I can use or I need to write them a
> > letter?
>
> > How to deal with line 15a and 15b on 1040?
>
> Want to offer the timeline, a bit slower? Maybe with dates and $$ ?
> You say you 'paid off' the loan? Back to the 401(k), I take it? The
> 1099R should only be the amount transfered and you show it rolled over
> on your 1040.
>

what is the form to show timeline, I have date paid but I understand
IRS doesn't want to read letter or handwriting.

--
<< ------------------------------------------------------- >>
<< 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 joetaxpayer on April 12, 2008, 11:56 am
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Fish wrote:

> what is the form to show timeline, I have date paid but I understand
> IRS doesn't want to read letter or handwriting.

I was asking for the chronology, as in:

3/5 - took out $2K loan from 401(k)
6/5 - transfered $8K from 401(k) to IRA
8/5 - paid back $2K loan to (?)

There is no form for the IRS, but sharing the exact sequence of events
more clearly may help us reply. You see, I don't understand how or why
you would have initiated a transfer while a loan was outstanding. That
strikes me as looking for trouble. You can't transfer the whole account
as the loan is supposed to remain secured by the 401(k). When you paid
back the loan, where did that money go? If it didn't go right back to
the 401(k), that may be your issue. I hope I am more clear.
Joe
www.blog.joetaxpayer.com

--
<< ------------------------------------------------------- >>
<< 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 Fish on April 12, 2008, 2:25 pm
Please log in for more thread options
> Fish wrote:
> > what is the form to show timeline, I have date paid but I understand
> > IRS doesn't want to read letter or handwriting.
>
> I was asking for the chronology, as in:
>
> 3/5 - took out $2K loan from 401(k)
> 6/5 - transfered $8K from 401(k) to IRA
> 8/5 - paid back $2K loan to (?)
>
> There is no form for the IRS, but sharing the exact sequence of events
> more clearly may help us reply. You see, I don't understand how or why
> you would have initiated a transfer while a loan was outstanding. That
> strikes me as looking for trouble. You can't transfer the whole account
> as the loan is supposed to remain secured by the 401(k). When you paid
> back the loan, where did that money go? If it didn't go right back to
> the 401(k), that may be your issue. I hope I am more clear.
> Joewww.blog.joetaxpayer.com
>

** 05/06 - took out $2K loan from 401K while making monthly payment of
the loan

My company was bought by a new company, I didn't like the 401K plan of
the new company, and liked Fedelity (which used by my former company)
to administer both 401K and IRA

** 12/07 - transfer the rest from 401K plan to IRA, administered by
Fedelity (while the loan is outstanding)

** 12/07 - paid off the loan to IRA (Fedelity) in the same month at
the time of rollover (transfer)

----

I received two 1099-R from former Fedelity 401K plan -

o One indicated an rollover amount of $X to IRA , not taxable
o One indicated an $2K distribution subjected to tax / penalty -
box 7 distribution code 1

since on the 1040 form, there is only 15a and 15b to deal with IRA,
and I have two 1099-R, I might have to write a letter with time line
after all.

does it make sense to you?

thank you

--
<< ------------------------------------------------------- >>
<< 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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