My wife's company was moved to a different company, thus terminating her employment with the original company in Sept 2019. She had an outstanding loan with her 403(b) plan. She either ignored or didn't see the notices from Fidelity that something had to be done about the loan, which i was unaware of. So, in Jan 2020, I receive a 1099-R form with 1L in box 7 saying the loan balance ($18k) is being treated as a distribution and we are liable for the taxes (fed, state, early withdrawal, etc). I read that with the Tax Cuts and Jobs Act of 2017 that we had until April 15, 2020 to repay the loan. So, my wife calls Fidelity and they pull the loan balance from our checking account plus interest ($19k) in Feb 2020. I see on her Fidelity account that they money went back in as "Loan Repayment". I didn't see another 1099-R generate or any other statement come through so I called Fidelity. They tell me that we are still have to pay taxes on the distribution and the loan repayment has to stay in the 403(b) plan. Only reason for the repayment was to avoid the tax on the distribution. Very confused on how we still have to pay taxes when the loan was paid back and why they we were allowed to repay the loan if it was going to still be treated as a distribution. So, instead of owing an extra $8k in taxes on the distribution, we are also out $19k for the payback which they say is treated as pre-tax dollars even though they pulled it out of my checking account. I demanded the loan repayment be rolled back but they don't appear to be budging. Need help on this!
