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    JoeBlackinNJ's Avatar
    JoeBlackinNJ Posts: 2, Reputation: 1
    New Member
    		  
    #1

    Jan 26, 2007, 12:05 PM
    Early Distribution from 401k/Loan not repaid
    Hi,

    Thanks for taking the time... live in NJ and worked in NJ... here is my question, I took a hardship withdrawal loan from my 401k... two years ago in early 2005. Approximately $4,000. I paid back about 1000k back to my own 401k. In Jan of 2006 I left the company and decided I was going get out of debt by taking a total distribution from the 401k.
    The total amount was about 18.5k... minus the loan of $3000.

    After the company took the 3k from the loanI never paid my loan back in full , they gave me a check for approx. 11k net from a gross amount of 15k.

    I paid Fed Tax of 3700k. NJ did not tax me.
    Now, come 2007 I get my 1099R and it shows an amount of 18.5 as the gross amount sent to me which I never received. My prior employer at this time is making me pay these taxes. Is this right or accurate. Am I responsible for those taxes if in Fact I did not receive that amount?

    Thanks for helping.
    ScottGem's Avatar
    ScottGem Posts: 64,966, Reputation: 6056
    Computer Expert and Renaissance Man
    		  
    #2

    Jan 26, 2007, 02:11 PM
    The balance of your account was $18.5K which included an outstanding Loan balance of $3K, correct? You then received a check For about $11K after withholding?

    You owe taxes on $18.5K as well as a 10% penalty. The 1009R is correct.
    JoeBlackinNJ's Avatar
    JoeBlackinNJ Posts: 2, Reputation: 1
    New Member
    		  
    #3

    Jan 26, 2007, 06:31 PM
    Thanks for reponding... It was 18.5K - 3k = 15k they taxed me 3,700k and gave me a net of 11k... why should I pay taxes again? They took 3700 dollars already?
    ScottGem's Avatar
    ScottGem Posts: 64,966, Reputation: 6056
    Computer Expert and Renaissance Man
    		  
    #4

    Jan 26, 2007, 07:17 PM
    No, What they did is WITHHOLD 20% towards your annual tax liability. This is just like the witholding from your paycheck. The 1099R states the value of your account. The outstanding loan balance was part of the plan assets and goes towards the value of the distribution. That amount is then added to your taxable income for the year. You then figure out your taxes based on your total taxable income. That amount is then applied towards the amounts withheld during the year to determine if you get a refund or owe money.
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
    		  
    #5

    Jan 26, 2007, 10:22 PM
    Scott is right, and it is LIKELY that you will owe more in taxes.

    A premature 401K or IRA distribution is routinely taxed at 35 - 46%, depending the state taxes and your marginal tax rate when you get the distribution.
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