Level 5

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Client rcvd a 1099-R with a code 1L-client paid loan off in full. Called company-they said they dont issue corrections and to work with the accounant to fix it. Help!

Forum|Forum|3 years ago
April 24, 2023
3 replies
17 views

They paid the loan in full prior to leaving their job. Company said he has to have accoutant fix it. Is there a correct way to fix this? Thank you in advance.

ProSeries Professional

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Best answer by TaxGuyBill

"they said they dont issue correction"

That would tick me off.

I would have the client email HR, and if possible, "cc" the CEO, Vice President, etc. of the company with something like this:

You have informed me that you filed an incorrect legal document (the 1099-R) with the federal government (the IRS) and that you are refusing to correct it.

If you will not correct it, I will be forced to inform the IRS of your refusal to correct the legal document that you filed with them. Are you sure you want me to do that? You may want to discuss that with the company's lawyers before responding to me.

qbteachmt

Level 15

Paid it off, to where/whom? Where is the money now and is there a Form 5498 for that repayment?

You might read on the differences between Deemed Distribution and Loan Offset:

https://www.irs.gov/instructions/i1099r#en_US_2023_publink1000291962

Don't yell at us; we're volunteers

D

dianejhartAuthor

Level 5

Thank you for your reply, I appreciate it. He paid the loan to his 401k in full before he left his job and he has paperwork to show the loan was paid in full. So it should not come in as taxable to him.

T

TaxGuyBillAnswer

Level 15

"they said they dont issue correction"

That would tick me off.

I would have the client email HR, and if possible, "cc" the CEO, Vice President, etc. of the company with something like this:

You have informed me that you filed an incorrect legal document (the 1099-R) with the federal government (the IRS) and that you are refusing to correct it.

If you will not correct it, I will be forced to inform the IRS of your refusal to correct the legal document that you filed with them. Are you sure you want me to do that? You may want to discuss that with the company's lawyers before responding to me.

D

dianejhartAuthor

Level 5

Thank you!

Skylane

Intuit Community Champion

If all else fails, then file it with no tax due. Explain in preparer notes. Return will likely result in a CP letter. Have the documentation on hand to respond to the CP and provide proof that transaction was not taxable.

If at first you don’t succeed…..find a workaround

D

dianejhartAuthor

Level 5

Thank you! This was on the lines of my original fix for the issue!

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