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Posted by Fish on April 12, 2008, 3:37 pm
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> Fish wrote:
> > ** 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?
>
> Yes. You have bad timing. You should have paid the loan in full and then
> done a transfer of all funds to the IRA. I read "paid off the loan to
> the IRA". Well, you can't really do that. It was a 401(k) loan and when
> you transferred it, they withheld $2000 that you owed. You can't go back
> and claim the $2000 as a deposit to the IRA. What you have is a new IRA
> deposit, hopefully deductible, but a 10% penalty on the $2000 401(k)
> withdrawal. The 401(k) administrator should have warned you of this, but
> you likely did this on line or by form only, and didn't speak to a live
> person. I hope someone else will comment in case I am still reading your
> situation wrong.
>
Fedelity told me just write a letter to IRS. by the way the total
amount of current fund in IRA is roughly equal to fund in 401K before
loan was borrowed. I might to to IRS to ask them.
thanks for your prior reply
--
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