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Hello Community,
My client provided my with a 1099-R and an EFT Statement (2 pages) from Prudential Tax Services that shows a breakdown of a payout to her after she terminated from her employer and drew down her remaining 401k but had a loan offset amount due that the reduced the gross disbursement by. Now her gross payment less the loan offset amount less federal taxes withheld gave her the Federal Taxable Portion of the Disbursement according to the Prudential EFT statement. Now the 1099R the provided to her has the 401k loan offset amount in Box 1 and Box 2a. The code in Box 7 is M2 and there is no amount in Box 4 (Federal Income Tax Withheld). This caused her to be in a liability situation and she swore based on the statement she gave me a copy of, which does indicate federal taxes withheld off of her distribution, but the 1099R only shows the 401k offset amount. When my client contacted Prudential Tax Services, they told her I am to take the federal tax amount withheld per the EFT statement into account when doing her return. I have never been faced with anything like this before, as I always go by the 1099R. What should I do? Thanks for any insight you can provide.