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1099-R Indirect Rollover

Level 1

Client received a 1099-R with Box 1 and Box 2a filled in (both have same amount).

Client says that the money was rolled over into another IRA (indirect rollover).

Distribution code is "1L"


In this case, how do I signify in Proseries that full amount was rolled over? If I signify that towards the bottom, it gives me an error code saying "rollover shouldn't be checked with distribution code L".

Thank you for your help!

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3 Comments 3
Level 15

IF code "L" is correct, it isn't eligible for a rollover.



Level 15
Level 15

The L means it was a Loan that wasnt paid back so it became taxable as an early withdrawal.  

Level 15

"was rolled over into another IRA"

The loan isn't likely from any sort of IRA. Your taxpayer had some sort of employer plan account. What is the account type, specifically?

From: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-loans

"IRAs and IRA-based plans (SEP, SIMPLE IRA and SARSEP plans) cannot offer participant loans. A loan from an IRA or IRA-based plan would result in a prohibited transaction."

The timeframe to repay a loan when they leave their job still owing, was extended by the 2018 Tax Reform law, until the due date of the tax return (including extensions) so that a person leaving a job has more time to repay 401(k) loan.

The rollover, by depositing (repaying) all or part of the loan’s outstanding balance to an IRA or (new employer) eligible retirement plan by the due date (including extensions) for filing the Federal income tax return for the year in which the loan is treated as a distribution, will reduce the amount that was "distributed" by the prior employer to apply against the unpaid balance. This rollover is reported on Form 5498. So, get a copy of that form or the account statement which proves the taxpayer did this part correctly and timely.

"Level Up" is a gaming function, not a real life function.