cathyan Posted June 12, 2013 Report Share Posted June 12, 2013 Client on extension brought in his paperwork yesterday. Included is a 1099-R for a LOAN he took out from his thrift plan. The 1099 is coded 1 and has Fed withholding. But it was a loan. He's paying it back, and hasn't missed any payments. What is the best way to handle this? He is going to talk to them, and, if needed, give me permission to talk to them, but I want to be prepared with the best way to explain that a loan, with up-to-date payments is not treated as a distribution. I've seen his paystubs, and it is being repayed. Thanks for any insights! Quote Link to comment Share on other sites More sharing options...
Guest Taxed Posted June 12, 2013 Report Share Posted June 12, 2013 I hate to say it but don't go by the taxpayers words! Request from the employer loan document he signed and when exactly did that loan default. There are mandatory notices that must be given. Did your client have more than one loan? I have seen 401(k) plans with 3 loans outstanding?? Quote Link to comment Share on other sites More sharing options...
cathyan Posted June 12, 2013 Author Report Share Posted June 12, 2013 He hasn't defaulted on it. They are taking repayment out of paycheck. Quote Link to comment Share on other sites More sharing options...
Guest Taxed Posted June 12, 2013 Report Share Posted June 12, 2013 If you are sure the loan was not defaulted then the 1099-R is most likely wrong! He should request the employer to issue a corrected form ASAP. 1 Quote Link to comment Share on other sites More sharing options...
jainen Posted June 12, 2013 Report Share Posted June 12, 2013 >>I've seen his paystubs, and it is being repayed<< Yes, his LOAN is being repaid. But that was only $50,000, not enough for the down payment on his home. So didn't he also take out a HARDSHIP distribution? Quote Link to comment Share on other sites More sharing options...
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