1099R, Code 1L

[geekgirldany]

Taxpayer has a Code 1L on 1099R. She is still employed by the same business where she took the loan out on her retirement. Since still employed by them doesn't the Code 1L mean she defaulted on the loan? Did not pay it back?

[Brian EA]

Taxpayer has a Code 1L on 1099R. She is still employed by the same business where she took the loan out on her retirement. Since still employed by them doesn't the Code 1L mean she defaulted on the loan? Did not pay it back?

That's correct. Since she defaulted on the loan she has to pay the penalty. It is no longer a loan. It's an early withdrawal.

[geekgirldany]

thanks just want to double check before I tell her. She thinks she doesn't have to pay tax on it. Gal from my slow talker thread