Once you are no longer with that employer, you don't have the option of paying the loan back. The remaining balance is considered a distribution to you.

Save the money, you'll need it next spring when the income tax and (probably) 10% early distribution penalties get added to your tax return.

I'm asking this because I still have before the end of the year to pay the loan. I also still have quite a bit in the 401K, so paying it back will increase its size too!

If indeed you have the ability to repay the loan, and you have the funds to do, i would strongly suggest you pay the loan, if you don't, you will lose all the future tax deferred earnings that would have accumulated into your 401k and when you retire, depending on your age and how your 401k does you could have a very comfortable retirement, or you could live on food stamps, the choice is yours, studies have shown, people when given the option of not paying back a 401k loan, never do, and don't realize THE mistake until they retire, PLEASE PLEASE, if possible pay it back!

22K is a significant balance and will go a long way toward keeping your retirement at the level it would be if you hadn't been laid off. Yes, I would definitely pay it back and avoid any penalties at all.

I lost my job after 5 years with the company, I had no other income, had to cash it in early. I did have them without federal taxes before distrubution, it was around 9,000.00. Would that be considered a hardship and will I still have to pay a penalty to the IRS?

If you can't pay the money back before the time limit is up the money you took out is going to be considered an early withdrawal. The problem with taking the early withdrawal is that you both have to pay tax on the money you took out as well as an early withdrawal penalty, which is 10%. The whole thing is going to cost you quite a bit of money. That twenty two thousand you took out may end up costing you as much as eleven thousand dollars in taxes, and the early withdrawal fee. That figure is very speculative, because I have no idea what tax bracket you currently reside.

In just about every case you are going to be better off repaying the loan, before your time runs out. There might be an argument to leaving the loan unpaid, and simply preparing to be unemployed. You may find that you need the money you withdrew, and every other dollar you can scrounge up as you search for employment. Good luck out there, the job market is rough.

In this case it is always best to merely pay back the loan. Sacrifices may be great, however in the long run it would be worth it. Some people live in the moment, while others think and sacrifice for the future, I guess it depends on what personality type you fit into. The best thing to do is not always the easiest.

Life is often full of unpleasant sacrifices, sometimes we must bite the bullet and choose the best course of action that will get our lives back on track. Taking the hard road is often the road to riches and gold.