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How are taxes computed if I have defaulted on a loan from my 401k?

asked by Rosark (68)

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Tags:  debt  retirement  taxes

answers

The balance due on the loan in default will become taxable income to you in the year you defaulted and you will also incur an additional 10% penalty for early withdrawal if you have not reached retirement age.

reply
posted by debbie80 (51)
6 votes

A 401k loan default is called a deemed distribution and is treated just like a withdrawal. You will be subject to regular income tax plus a 10% early withdrawal penalty.

6 votes

Their is a 10% penalty for early withdrawl ,because you defaulted, the full loan amount ,taxed at 30% unless you paid on some of that loan back

6 votes

Your taxes will be computed as if you took a distribution. It will be fully taxed, and if your under 591/2 you will be accessed a 10 percent penalty.

6 votes

You owe taxes on the entire amount from your 401K, plus a 10% penalty. So if you are in the 25% income tax bracket, you'll owe 35% in taxes.

4 votes

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