Unless this is a Roth 401k, your plan administrator will most likely withhold 20% of your cash-out amount for federal taxes. If you are under age 59 1/2, you will also be subject to a 10% early withdrawal penalty, unless you meet one of the exceptions listed in this IRS reference: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distri...
A condition of an IRS installment agreement is that the IRS will automatically apply any refund due to you against taxes you owe.
A down payment on a loan is not tax deductible.
A final consideration is that you will receive a 1099-R at the end of the tax year showing the amount of the 401k distribution as taxable income (the 1099-R will also show any taxes withheld). This added income sometimes pushes the taxpayer into a higher tax bracket.
**Answers are correct to the best of my ability but do not constitute tax or legal advice.
