1099-R Code 1L

[WMES VP]

I received a 1099-R with Box 7 Code 1L (and IRA/SEP/SIMPLE, not Checked).

I am using OLT Online Tax services. When I fill in the 1099-R online as I received, the 1040 shows Line 16b ("Income, Taxable P & A) with amount from 1099R Boxes 1 & 2a.

However, it does not show anything in Line 60 (1040) "Other Taxes".

This money is to repay an outstanding Loan from my 401k, from an old employer (I left in Dec 2006), but the 401k is still active. I can not tell if the Outstanding Loan payment was deducted from my 401k or not. I have not called the 401k plan to confirm yet.

Does it make sense that the Loan Distribution is treated as income but does not have additional tax?

[oceanlovin'ea]

Need an enrolled agent

or tax professional to help you with your return, if you are not one.

It is always the course of wisdom to seek professional help when dealing with unusual situations.
I'm not sure where you live but you can go to www.naea.org and find an enrolled agent in your city to help you.

Linda F

[Kram BergGold]

Your age

Were you 59.5 or older on the day the loan became a distribution? If so this is why no penalty. If not and you don't meet some other exception to the penalty rule then your software is making an error.

[Hankster]

Line 60 should show a 10% tax penalty.I think theres a glitch in there program.

[WMES VP]

Age and Professional help

I am under 59.5.

Until this issue. Professional help never needed. Taxes are just pluses and minuses as long as you can understand the governmenteese (haha).

I have in writing the Software's claim of being correct (after asking the exact question).

If the "L" is taken out of the software I get the additional 10% penalty in Line 60.

Thank you both for the interest and questions/help.

[WMES VP]

Glitch

I am no lawyer, so I do not know who takes fault for the glitch. I was just posting the fact that I asked them if the software was assumed to be correct. They said yes on an "online chat". I am suprosed they made the claim myself.

[ChEAr$]

Just today

Were you 59.5 or older on the day the loan became a distribution? If so this is why no penalty. If not and you don't meet some other exception to the penalty rule then your software is making an error.

I had a client, over 59.5, who had a 1099R with the code "L", and in addition to being
taxable (OF COURSE!) the 10% penalty applied.

So it would appear that the magic 59.5 age don't really matter. Hmmmm, more research.
Opinions, anyone?

[David1980]

I am no lawyer, so I do not know who takes fault for the glitch. I was just posting the fact that I asked them if the software was assumed to be correct. They said yes on an "online chat". I am suprosed they made the claim myself.

Most advice from software companies has the same guarantee of accuracy that you get when you call the IRS and get an answer. That is to say, none. And if IRS audits this ignorance/blaming software CO ain't gonna save you.