On Apr 12, 10:44 am, joetaxpayer <joetaxpa...[at]nospam.com> wrote:
- quote -

Fedelity told me just write a letter to IRS. by the way the total
amount of current fund in IRA is roughly equal to fund in 401K before
loan was borrowed. I might to to IRS to ask them.

thanks for your prior reply

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Fish wrote:
- quote -

Yes. You have bad timing. You should have paid the loan in full and then
done a transfer of all funds to the IRA. I read "paid off the loan to
the IRA". Well, you can't really do that. It was a 401(k) loan and when
you transferred it, they withheld $2000 that you owed. You can't go back
and claim the $2000 as a deposit to the IRA. What you have is a new IRA
deposit, hopefully deductible, but a 10% penalty on the $2000 401(k)
withdrawal. The 401(k) administrator should have warned you of this, but
you likely did this on line or by form only, and didn't speak to a live
person. I hope someone else will comment in case I am still reading your
situation wrong.

Joe

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On Apr 12, 7:56 am, joetaxpayer <joetaxpa...[at]nospam.com> wrote:
- quote -

** 05/06 - took out $2K loan from 401K while making monthly payment of
the loan

My company was bought by a new company, I didn't like the 401K plan of
the new company, and liked Fedelity (which used by my former company)
to administer both 401K and IRA

** 12/07 - transfer the rest from 401K plan to IRA, administered by
Fedelity (while the loan is outstanding)

** 12/07 - paid off the loan to IRA (Fedelity) in the same month at
the time of rollover (transfer)

----

I received two 1099-R from former Fedelity 401K plan -

o One indicated an rollover amount of $X to IRA , not taxable
o One indicated an $2K distribution subjected to tax / penalty -
box 7 distribution code 1

since on the 1040 form, there is only 15a and 15b to deal with IRA,
and I have two 1099-R, I might have to write a letter with time line
after all.

does it make sense to you?

thank you

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Fish wrote:

- quote -

I was asking for the chronology, as in:

3/5 - took out $2K loan from 401(k)
6/5 - transfered $8K from 401(k) to IRA
8/5 - paid back $2K loan to (?)

There is no form for the IRS, but sharing the exact sequence of events
more clearly may help us reply. You see, I don't understand how or why
you would have initiated a transfer while a loan was outstanding. That
strikes me as looking for trouble. You can't transfer the whole account
as the loan is supposed to remain secured by the 401(k). When you paid
back the loan, where did that money go? If it didn't go right back to
the 401(k), that may be your issue. I hope I am more clear.
Joe
www.blog.joetaxpayer.com

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On Apr 11, 2:44 pm, joetaxpayer <joetaxpa...[at]nospam.com> wrote:
- quote -

what is the form to show timeline, I have date paid but I understand
IRS doesn't want to read letter or handwriting.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Fish wrote:
- quote -

Want to offer the timeline, a bit slower? Maybe with dates and $$ ?
You say you 'paid off' the loan? Back to the 401(k), I take it? The
1099R should only be the amount transfered and you show it rolled over
on your 1040.

Joe
www.blog.joetaxpayer.com

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

how do explain to IRS that a loan from 401K was paid off in this
scenario

I took out a loan from 401K plan and convert the rest to IRA to the
same company who handles both plans.

I paid off the loan quickly (within 60 days to avoid tax) AFTER I
convert to IRA plan from 401K

I receive a 1099-R (distribution code 1, box 7) that the loan amount
is taxable from my former 401K plan (even it was paid off long ago)

----

How I deal with 1099-R form, and tell IRS it is not subjected to tax
or penalty? is there any form I can use or I need to write them a
letter?

How to deal with line 15a and 15b on 1040?

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >