I took out a 401k loan awhile back and have about a 9000 balance. Then Covid happened and I lost my job (my company completely went out of business). I rolled over my 401k into an IRA and assumed that my loan would be paid with an offset distribution when the funds were rolled. However, it wasn't. I now still have a loan balance but no other funds in the account. I did not even realize that I still owed the loan until months later when I received an email telling me that the payment was overdue.
I was told that I would receive two 1099-R Forms (one for the distribution and one for the defaulted loan) so what does that mean? I will pay penalties and taxes on the 9000? But that doesn't satisfy the loan right? Or does it since I borrowed from myself? Do I have to write a check and pay off the loan? I have been racking my brain all day trying to figure out how I was allowed to roll over the money without satisfying the loan. I am totally confused.
