Form 1099-R Reporting for Loans

[Guest Joseph Corona]

If a participant terminates employment with an outstanding loan balance and rolls the funds into an IRA, how many

1099-R forms should that participant receive and what are the distribution codes that should be reported on the forms?

If a participant terminates employment with an outstanding loan balance and takes a lump sum distribution, how many

1099-R forms should that participant receive and what are the distribution codes that should be reported on the forms?

[Guest]

loans are fun, aren't they?

I will assume the loan has not been treated as a 'deemed distribution' e.g. in default while the person was active, and therefore a 1099 was already issued.

therefore:

ee receives two 1099

1. amount of rollover - no tax required

2. amount of loan - tax required. there is no special code for a 'loan offset'. as far as I can tell you simply use whatever code would normally apply - probably early distribution, but if the person is at age 55 at date of termination, then noral distribution would work.

Off the top of my head, a loan offset is the only case where you legitamitely don't have any withholding tax.(nor is any required! see Treas Reg 31.3405©-1, A-11

if the person takes it all as a lump sum then you have 1 1099

you should do withholding on the entire amount (including the loan offset)

at least that is how i understand things!