401k Loan - Tax Consequences or Not

[gmk]

I had a loan on my 401k for app $7000. When I went unemployed in December I contacted the 401k plan folks and they told me that I had to repay it in full by April or they will have to close the loan and issue a 1099 for tax purposes. I was told by them that the plan did not allow for repayment installments (which I offered to do) as I was no longer employed by the company.

My question is, does my BK have any affect on the 1099 when it comes tax time? I don't believe it's listed in my BK filing (its money paid back to me) so does that matter? Should I have listed it? Am I responsible for te taxes on it?

[HHM]

BK has NO AFFECT on that scenario. You will be hit with a 1099 and be required to pay the appropriate income tax and 10% penalty.

Your situation is the textbook case of WHY YOU DON'T DO 401(k) loans. Heck, even Suze Orman would have your file BK vs. taking out a 401(k) loan (and that is saying something).

Sorry. Luckily it is a relatively small amount, I have seen people have 50K, 70K, 90K 401(k) loans and get bit just like you have which creates a HUGE IRS bill.

[gmk]

Aw shucks.

Thanks for the info.