Got two 1099-R forms for the same 401k withdrawal - totally confused!

Hey everyone! I'm in a bit of a pickle with my taxes this year. I switched jobs back in October and decided to just cash out my 401k instead of rolling it over (I know, probably not the best financial move). Here's where it gets weird - I received TWO 1099-R forms from my old employer's plan. One shows the full amount of my 401k with a distribution code 1. The second one shows a smaller amount (what I actually received after they deducted the outstanding loan I had against the 401k) with distribution code M1. I'm using TurboTax and it doesn't even have an option for code M1 when I try to enter it! Do I need to report both forms? Just one? I'm completely lost here. Extra details if it helps: I live in Texas and I'm 42 years old, so definitely under that 59½ threshold. Any advice would be super appreciated!

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18 comments

Ben Cooper

•8M

Yes, you need to report both 1099-R forms. This is actually a common situation when you have an outstanding loan on your 401k at the time of distribution. The first 1099-R with code 1 represents the total distribution amount (the full balance of your 401k). The second 1099-R with code M1 shows what you actually received after the loan offset. The "M" code indicates there was a loan involved in the distribution. Since your tax software doesn't have the M1 code option, you should enter it as code 1 plus check any box that indicates "loan offset" if available. The IRS will reconcile both forms since they match to your SSN. Be aware that since you're under 59½, you'll likely face a 10% early withdrawal penalty on the total distribution (including the loan amount) unless you qualify for an exception. The loan amount is considered part of the distribution even though you didn't physically receive that money.

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Ben Cooper

•8M

Yes, unfortunately you do pay the 10% penalty on the entire distribution amount, including the loan portion. The IRS considers the loan offset as part of your distribution because when they wrote off your loan, that was technically a financial benefit to you (the debt was canceled). Regarding repayment options, you have until the due date of your tax return, including extensions, to roll over the loan offset amount to an IRA or another employer plan to avoid taxes and penalties on that portion. So you'd have until October 15, 2025 (assuming you file an extension) to complete this rollover. The rest of the distribution (the amount you received in cash) would still be subject to taxes and penalties unless you've already rolled that over within the standard 60-day window.

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Cynthia Love

•8M

I went through a similar situation last year with my 401k and those confusing multiple 1099-Rs. I spent hours trying to figure it out with different tax programs until I found taxr.ai (https://taxr.ai). Their system actually analyzed both my 1099-R forms and explained exactly how to handle the M1 code situation. The tool helped me understand that the loan offset amount gets treated differently than the cash distribution. They even generated a detailed explanation I could keep for my records in case of an audit. I was able to properly report both forms without overpaying on penalties. Their document analysis feature is super helpful for these weird tax form situations that most software doesn't handle well.

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Cynthia Love

•8M

It doesn't file your taxes directly - it analyzes your tax documents and creates a detailed report explaining exactly what each form means and how to properly report it. So for your 457 plan with unusual codes, it would break down what each code means and give you specific instructions. It doesn't directly integrate with tax software, but it gives you step-by-step guidance on exactly what to enter in whatever software you're using. For me, it explained that for the M1 code, I should enter it as code 1 in TurboTax but then make sure to check the "loan offset" box in the additional options. It was super specific about where to find these options which saved me tons of time.

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Darren Brooks

•8M

Just wanted to report back after trying taxr.ai for my complicated 457 distribution forms. It actually worked really well! Uploaded my forms and within minutes got a detailed explanation about my distribution codes (which were different from a regular 401k). The report walked me through exactly how to enter everything in TurboTax, including which screens to look for and which boxes to check for the special distribution codes. Saved me from paying an accountant $350 just to handle this one issue. Definitely recommend if you're dealing with weird retirement distribution forms like these multiple 1099-Rs.

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Elliott luviBorBatman

•8M

Speaking from experience, you might want to call the IRS directly to confirm how to properly report those two 1099-Rs, especially with that M1 code. I tried calling them for weeks about a similar issue last year and could never get through. Then I found this service called Claimyr (https://claimyr.com) that got me connected to an actual IRS agent in about 15 minutes instead of waiting on hold for hours. They have a demo video showing how it works: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed exactly how to handle my multiple 1099-R forms and told me some specific notes to include with my return. Probably saved me from getting an adjustment letter months later.

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Elliott luviBorBatman

•8M

It works by using technology to navigate the IRS phone system and secure your place in line. When an agent is about to be available, you get a call connecting you directly to them. So yeah, it basically handles the hold time for you so you don't have to sit there with a phone to your ear for hours. The catch is that there's no guarantee on exactly how long it will take - during busy times it might be 30-45 minutes instead of 15. But that's still way better than the 2-3 hour waits (or never getting through at all) that are common when calling directly. It worked exactly as advertised for me, and the IRS agent I spoke with was able to answer all my questions about the multiple 1099-R forms. Definitely worth it during tax season when the wait times are insane.

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Mateusius Townsend

•8M

I have to eat my words. After my skeptical comment, I was desperate enough to try Claimyr for my own 401k distribution issue. I had three different 1099-Rs with different codes and couldn't figure out how to report them correctly. Got connected to an IRS rep in about 22 minutes (still can't believe it). The agent walked me through exactly how to report each form, confirmed I needed to include all of them, and gave me specific instructions for handling the loan offset portion. She even told me about a special form I needed to include to avoid getting an automatic adjustment letter. For anyone dealing with these weird retirement distribution situations, getting direct confirmation from the IRS saved me from making a mistake that would have triggered an audit.

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Kara Yoshida

•8M

Make sure you keep documentation about that loan offset amount! I had a similar situation in 2023 and ended up getting a CP2000 notice from the IRS because they thought I didn't report the full distribution. Even though I included both 1099-Rs, their automated system sometimes doesn't match them up correctly. I had to send in a copy of both 1099-Rs and a letter explaining that they were for the same distribution but with the loan offset reported separately. It all worked out, but was a major headache that took months to resolve.

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Kara Yoshida

•8M

I would definitely include a brief explanation in the "additional information" section of your tax return if your software has that option. Just a simple note saying "Received two 1099-R forms from the same plan - one for total distribution (code 1) and one for net amount after loan offset (code M1)." You should also keep copies of both 1099-Rs plus any documentation from your plan administrator explaining the loan offset for at least 3 years. If they do send you a notice, having everything organized will make it much easier to respond quickly.

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