1099R for cash distribution and defaulted loan

[Pammie57]

A participant terminated in 2012; she had a defaulted loan at that time.  from looking back at records, no 1099R was done for the loan.  She got a cash distribution in 2016.   Could a 1099R be done for 2016 and include both the cash distribution and defaulted loan?

Or should a 1099R be done for 2012 & 2016? 

If just 2016, can the total of cash and loan be on one 1099R

 

Thanks

 

[Lou S.]

A 2012 (or possibly 2013 if the grace period extended into 2013) 1099-R for the defaulted loan should be issued.

 

 

[Tom Poje]

this is a tax issue. so one would have to revise tax forms back in 2012 (or 2013)

However

 under EPCRS it would require VCP and a 1099R could be issued in the year of correction

Section 6

.07 Rules relating to reporting plan loan failures. (1) General rules for loans. Unless correction is made in accordance with this section 6.07(2) or (3), a deemed distribution under § 72(p)(1) in connection with a failure relating to a loan to a participant made from a plan must be reported on Form 1099-R with respect to the affected participant and any applicable income tax withholding amount that was required to be paid in connection with the failure (see § 1.72(p)-1, Q&A-15) must be paid by the employer. As part of VCP and Audit CAP, the deemed distribution may be reported on Form 1099-R with respect to the affected participant for the year of correction (instead of the year of the failure). The relief of reporting the participant’s loan as a deemed distribution on Form 1099-R in the year of correction, as described in the preceding sentence, applies only if the Plan Sponsor specifically requests such relief.

 

section VI of the VCP form has the following checkbox

With respect to failure(s) #________, that a deemed distribution be reported on Form 1099-R with respect to affected participants for the year of correction instead of the year of the failure.

[Kevin C]

When was the loan taken?

From Rev. Proc. 2016-51, Section 6.07(2)(a):  ...   "The correction methods described in section 6.07(2)(b) and (c) and section 6.07(3) are not available if the maximum period for repayment of the loan pursuant to § 72(p)(2)(B) has expired." ...