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Qualified 1099R Covid distribution program not allowing to defer????

tscott1205
Level 4

Taxpayer has a 1099R with a distribution code of L (loan treated as a deemed distribution). However the program did not defer 2/3 of the gross distribution. Research does not back this up.  Anyone know anything differently.

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4 Replies 4
garman22
Level 12
Level 12

I dont believe a Loan distribution qualifies for the 3 year spread. But I am not 100% sure. Have you researched this?

Just-Lisa-Now-
Level 15
Level 15

Sounds like a prior year distribution that they defaulted on...not sure thats considered a Covid distribution.


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
tscott1205
Level 4

Q8. What plan loan relief is provided under section 2202 of the CARES Act?

A8. Section 2202 of the CARES Act permits an additional year for repayment of loans from eligible retirement plans (not including IRAs) and relaxes limits on loans.

  • Certain loan repayments may be delayed for one year: If a loan is outstanding on or after March 27, 2020, and any repayment on the loan is due from March 27, 2020, to December 31, 2020, that due date may be delayed under the plan for up to one year. Any payments after the suspension period will be adjusted to reflect the delay and any interest accruing during the delay. See section 5.B of Notice 2005-92.    
  • Loan limit may be increased: The CARES Act also permits employers to increase the maximum loan amount available to qualified individuals. For plan loans made to a qualified individual from March 27, 2020, to September 22, 2020, the limit may be increased up to the lesser of: (1) $100,000 (minus outstanding plan loans of the individual), or (2) the individual's vested benefit under the plan. See section 5.A of Notice 2005-92.
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qbteachmt
Level 15

Form 8915-E instructions:

"Distributions that are not qualified 2020 disaster distributions...

The following distributions are not qualified 2020 disaster distributions even if the disaster is listed in Table 1

Loans that are treated as deemed distributions pursuant to section 72(p)."

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