Tax year for distributed loan balance?

We have a participant who just took a full distribution for termination and she had an outstanding loan balance. She wanted us to withhold taxes for the outstanding loan balance as well as her distribution so she wouldn't have to pay them. What we did is put the distribution in at Schwab with the total gross balance as the entire vested balance plus the outstanding loan, then calculated federal and state taxes based on that number, then put the outstanding loan balance in "less loan balance" to offset the actual payment amount to be correct. The partipant's accountant is asking whether the loan balance, which is now a distribution and being taxed, is going to be taxed as a part of 2025, when this total distribution happened, or as 2024, when she took out the loan. Will it be a seperate 1099 for 2024 with the loan balance or will it all be part of the 2025 distribution?

It sounds like you did everything correct.  If the distribution is bieng processed in 2025 and the loan is being off set in 2025, it will be taxable income in 2025. You will presumably send her two 2025 1099-R one for the distribution of cash and one for the offset of the loan since they have separate 1099-R codes. 

1 hour ago, Lou S. said:

It sounds like you did everything correct.  If the distribution is bieng processed in 2025 and the loan is being off set in 2025, it will be taxable income in 2025. You will presumably send her two 2025 1099-R one for the distribution of cash and one for the offset of the loan since they have separate 1099-R codes. 

Thank you!