If you lost your job due to COVID-19, the unpaid loan balance may qualify as a COVID-19 distribution. The New COVID-19 Relief package allows this distribution for a greater flexibility as far as how income taxes are paid. You may be allowed to have an additional year to repay the loan, or upon the distribution, you will not be subject to the 10% early withdrawal penalty, and may be "recontributed" for up to three years.
Before Covid, if you do not repay the loan, it will be treated as a taxable distribution income and subject to 10% early withdrawal penalty if you are under age 59 1/2.
For more information, click on these links:
Delay repayment
Covid 19 tax treatment
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