I have a 1099R with 1M in box 7. How do I enter a distribution code that isn't in the drop-down list?

[George4Tacks · Accepted solution]

M is not in the drop down and it does not affect the taxability, or the penalty. 

FYI - It means they had a 401(k) or other plan loan and got laid off or fired. The loan was due the date they were terminated and if they didn't have the money, they were toast.  Depending on the plan, they do have up to 90 days to pay off the loan, so talk with the client. If they paid off all or some, that could impact the taxable portion, but generally they don't. Be sure they have documentation. 

[itonewbie]

"How do I enter a distribution code that isn't in the drop-down list?"

These codes are designated by the IRS and are shown in the instructions for 1099-R.  What exactly do you have?

[fymvirtualoffice]

The code I have is 1M which is related to Qualified Plan Offset for terminated employees.

[TaxGuyBill]

No, it is really two separate codes.  Code "1" and a second Code "M".

[itonewbie]

As George says, M is not a taxable event unless the rollover requirement was not met.  So you'd need to check with your client whether there was an indirect rollover, which should be reported on a F.5498.

The window used to be 60 days, just like normal rollover, but TCJA has changed that to the due date of the return, including extensions.  This means your client still has time to cover this and avoid the tax and early withdrawal penalty if it has not yet been rolled over; the F.5498 will then show the late contribution in Boxes 13a, b, and c.

If the rollover is completed within this extended timeframe, you can simply select 1 as the distribution code and enter the same amount under "Indirect Rollovers", like you would with other types of indirect rollover.  Otherwise, you can enter 1 as the distribution code and the amount would be subject to tax plus the early distribution penalty.