Updated September 28, 2026. Quick answer: code M means an outstanding loan from your qualified plan was offset, cancelled, against your account balance, usually because your employment ended or the plan terminated. Unlike an ordinary loan default, a qualified plan loan offset gives you until the due date of your tax return, including extensions, to roll the offset amount into an IRA or another plan and avoid the tax entirely.
Related guides on this topic: 1099-R Code S and 1099-SA Box 3 Distribution Codes 1 to 6 Explained.
What the IRS tells the payer
From the current instructions, code M is “Qualified plan loan offset”. The full instruction text reads: “Use code M for a qualified plan loan offset (which is generally a type of plan loan offset due to severance from employment or termination of the plan).” It may be used with: 1, 2, 4, 7, or B.
Why the deadline is longer than a normal rollover
Form 1099-R’s recipient instructions describe the general loans-as-distributions rule: “If you borrow money from a qualified plan, section 403(b) plan, or governmental section 457(b) plan, you may have to treat the loan as a distribution and include all or part of the amount borrowed in your income. There are exceptions to this rule. If your loan is taxable, code L will be shown in box 7a.” Code M is the distinct, extended-deadline cousin of that rule for loans offset by severance or plan termination, rather than an ordinary default reported under code L.
Which line it drives
If not rolled over within the deadline, the offset amount is taxable income reported on the pensions and annuities line of Form 1040, the same as any other qualified-plan distribution.
The 10% additional tax
If the offset is not rolled over in time, it is treated as an ordinary distribution from a qualified plan for early-distribution purposes, so the 10% additional tax applies unless one of the Form 5329 exceptions available to qualified plans fits, separation from service at 55 (exception 01), a series of substantially equal payments (exception 02), disability (exception 03), death (exception 04), or the others that are not limited to IRAs.
Common mistakes
- Confusing code M’s extended tax-return-due-date rollover deadline with the ordinary 60-day rollover window that applies to an offset that is not a qualified plan loan offset. A code L deemed distribution cannot be rolled over at all.
- Missing the rollover deadline and only then discovering it applies.
Box 7 is the payer’s claim, not the law
The code in Box 7a records what the custodian knew when it cut the cheque. It is not a ruling on what you owe, and the IRS instructions say so in as many words. On code 1 the instruction to payers is to use it “even if the distribution is made for medical expenses, health insurance premiums, qualified higher education expenses, a first-time home purchase…” and a list of other genuine statutory exceptions.
Related codes worth reading alongside this one: code B.
Every code in one place: the Box 7 table. If yours looks wrong: how to fix it.
Figures verified against the IRS Instructions for Forms 1099-R and 5498 (2026), the Form 1099-R recipient instructions, the IRS Instructions for Form 5329 (2025), the IRS Instructions for Form 1040 (2025), and 26 U.S.C. § 402(c)(3)(C) on September 30, 2026.
Sources
- IRS, Instructions for Forms 1099-R and 5498 (2026), Table 1, Guide to Distribution Codes: https://www.irs.gov/instructions/i1099r
- IRS, Instructions for Form 5329 (2025): https://www.irs.gov/instructions/i5329
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How our partner relationships workCode meanings are read from the IRS Instructions for Forms 1099-R and 5498 (current edition, tax year 2026), Table 1, Guide to Distribution Codes, at irs.gov on September 28, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer or the IRS is the right place to confirm anything consequential.