Question by  Haken (14)

What happens if you are unable to pay a 401k loan?

I took a loan out on my 401k and have encountered some financial difficulties and can not repay it.


Answer by  debshink (60)

If you are unable to come up with the funds to pay the balance due on your 401K loan the IRS will consider it a distribution subject to income taxes and possibly penalties.


Answer by  Chaneygirl (1755)

If you are unable to repay, it becomes an early distribution of your retirement plan subject to income taxes and early distribution penalties. If it is possible to repay any of it, it would be a good idea.


Answer by  technogeek (6640)

You will have to declare the income on your next tax return. You will receive a 1099 stating how much you borrowed and have to pay the tax.


Answer by  flamiss22 (5081)

Since this is your money the company will just reduce the amount you would have received when you eventually leave the company or sooner if that is their policy

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