Stopping payments on the 401(k) and not making up the shortfall within the grace period for doing so (usually 60 days)has apparently resulted in a deemed distribution of the outstanding loan balance. A deemed distribution is taxable and subject to a 10% early-distribution penalty unless you have a penalty exception that applies.
A deemed distribution does not satisfy the loan. You are still required to pay back the loan. Because you will have already paid the taxes on the outstanding loan balance, your repayments now become after-tax basis in your 401(k). In the future when you are permitted to make distribution, each distribution will be partially taxable and a partially nontaxable distribution of your after-tax basis, so you will not be taxed twice on this money.
