About 9 years ago, I stupidly borrowed $1300 dollars from my 125k differed comp account. I remember getting a form later on for tax info but I can't recall if I added that to my taxes that year or not. As young and dumb as I was back then, I doubt I claimed it. My question is, how do I go back and do that so I don't get hit with huge penalties years from now? Should I contact the IRS? I've googled the question and found a few answers about having to repay it when you leave the job, but my job is stable and I probably will retire from here in 20-25 years. HELP!

I don't quite understand - did you borrow the money (in which case you have no tax liability), or did you take a withdrawal? If a withdrawal, then the plan admin would have sent you (and the IRS) a 1099-R form detailing the amount of the withdrawal, and they would have withheld 20% for federal income tax purposes. If you failed to report it on your taxes that year, then I would think the IRS would have noticed the discrepancy long ago and come after you. Since they didn't, that makes me think that you either borrowed the money, or if you took a withdrawal you properly reported it. If you borrowed the money, your plan admin should have started taking $$ from your paycheck each month to pay it back - again, with no tax consequences. I suggest you review your return from 9 years ago and see just what you reported (or didn't report), and also check your 401(k) plan statements from back then to see what the activity really was. Then you can get back to us and clarify what actually happened.

Hello
Thanks for the reply. Reading your answer tells me that I was incorrect; I didn't borrow the money because I didn't pay it back. I withdrew the money and did get the form from the deferred comp company but never heard anything from the IRS. I'd have to look to see if I have my '02 taxes or not. So your saying that if I haven't heard from the IRS then I probably filed correctly? I hope that's the case because I wouldn't even know who to contact at the IRS to find out.


So if I find out I didn't report it, I probably am looking at being taxed on that amount plus interest for all those years also? Ouch...

Has the IRS contacted you about claiming the $1300 for the year in which you borrowed it? My understanding is that the IRS, by law, has 2 years with which to require you to amend your tax return when they discover unclaimed income. (I was in a similar situation years ago.) Since you borrowed this money 9 years ago you may actually be off the hook as far as claiming it for tax purposes. Now as far as the terms of repaying the loan, you'd have to check with your plan administrator.

Thanks for your reply. I have not been contacted by the IRS, I just have been getting my financial life in order and have had this on my mind for awhile. I've heard horror stories about the IRS and figured they would chase me to my deathbed for this money. Really, I just don't want to find out at retirement, (along time from now), that I owe on this money. I will contact my def. comp company and find out what I need to do. And again, it was a withdrawal, I didn't borrow from the account. It was a hardship withdrawal. To pay taxes for a car I shouldn't have bought. Because I couldn't afford it then. But I had to have it. STUPID!! Thanks for the info.

I found my '01 and '02 taxes so I have a little more information. Just a quick rundown of my question for anyone out there that can help.
In '02 I WITHDREW $1300 from my deferred comp plan under emergency withdrawal, (it was an emergency in my mind). Lately, I've been working on getting my financial life in order and have been thinking about this withdrawal and what I need to do as far as taxes. I've looked at both my '01 and '02 taxes, and I don't think I reported this money to the IRS. I HAVE NOT been contacted by the IRS or my stated DOR, but I want to get this taken care of. I don't want a huge penalty down the road if this comes up for some reason. Again, its been 7-8 years since I did this, but I still want to take care of it. I did find the W-2 paper from the deferred comp and it shows it in box "11", non-qualified plans with a "G". If anyone can please give me some advice because my next step is contacting the IRS, and that never ends good! Thank you in advance!

I think you may be OK. Back in 2001 Box 11 was used to report distributions made to you from a non-qualified deferred compensation plan, or a section 457 plan. That amount is taxable and should also be included in the compensation shown in Box 1. Please verify that the amount is Box 11 is the $1,300 distribution -if it is, then you did inded report the distribution by way of your salary from box 1. Also, is that Code G in Box 12 (not 11)? That would indicate that you made contributions to a section 457(b) deferred compensation plan (a plan for government employees).

Yes sir, I am a government employee, so it is a 457(b). But all of the info is in Box 11, non-qualified plans, Code "G", $1323. There is nothing in boxes 12a, 12b, 12c, or 12d. Thank you for the good news, I hope I am in the clear! I always thought the IRS would have contacted me if I owed this but I hadn't heard anything and since I thought I owed this money, I was going to contact them and go from there. Looks like you've saved me the headache!

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Originally Posted by safe1

Looks like you've saved me the headache!

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Glad to be of help!