There may have been a misunderstanding about what your tax situation might be when you decided to take this distribution from your 401k.
What is a 401(k) loan? (This postpones any income and penalty if plan terms allow and are met)
A 401(k) loan allows an account holder to borrow against their savings held within the account. Loans of this type don't trigger the 10% early withdrawal penalty that occur when money is permanently taken out of a 401(k). There are limits to the repayment terms and amount that can be borrowed - generally a 401(k) loan must be repaid within five years (though longer terms can be available if used for a principal residence) and the amount of the loan is limited to half of the account balance or $50,000, whichever is less.
What is a 401(k) withdrawal?
As the term implies a 401(k) withdrawal is simply pulling money out of a 401(k) account, which can be done at any time - up to the limit of the account balance. There is a significant cost to withdrawing funds from a 401(k) before the age of 59 1/2, however, as the IRS imposes an early withdrawal penalty of 10%. Early withdrawals from these qualified retirement accounts is not recommended, unless needed as a last resort. Even then, there are alternatives such as hardship withdrawal provisions that can shield account holders from tax penalties if they meet certain conditions and are then simply taxed as regular income.
As indicated by our Tax Champ @DoninGA a payment agreement can be a consideration.
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