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Asked 3/21/2009
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401k loan payment My husband had a outstanding loan on his 401k. He took out another 401k loan and used part of that loan to pay off the first loan. The money went back into the 401k so we deducted the first loan amount from the second loan amount and paid taxes and penalties on the remaining amount. We had already paid the taxes and penalties on the first loan. Did we do the right thing? |
Answer 1/1 - Submitted 3/24/2009
If it is a loan.. to be paid back.. there are no taxes due on it... If it was a distribution you would have received a 1099r stating the amount the administrator of the plan reported as a taxable distribution to the IRS... if you did not receive one, and did not take any money out of the plan except as a loan... you shouldn't have paid taxes on anything,.... if the first loan was deemed distributed (he did not pay on it, and the plan defaulted it) then the entire amount of the first loan would be taxable... but you still would have received a 1099r.... I would contact the administrator to make sure the amount if any you were to have reported on your taxes.
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