Employment change 401k loan became payable. So my income went up by $15K. I owe $3500 due to 401K loan

[Opus 17]

do you have a question?

If you had a 401(k) loan outstanding at company A, and you leave their employment for any reason, the loan immediately becomes due.  If you don't repay the loan (you usually have 60 days) then the outstanding balance becomes an offset distribution to you and you get a 1099-R, and the offset distribution is subject to income tax plus a 10% penalty for early withdrawal if you are under age 55.  (When you borrowed the money it was not taxable, because you promised to repay it.  Since you now get to keep the money you didn't repay, it is treated as a withdrawal or distribution and you must pay income tax on it.)

It doesn't matter why you left the company or what you did next.

However, you can avoid the tax by making a rollover contribution to a new qualified retirement plan or a private IRA by the tax filing deadline.  It sounds like you had around $10,000 outstanding as an offset distribution.  If you can contribute $10,000 to a new plan before the filing deadline, you can treat it as a rollover, and then you won't pay tax on it.  Because of the high taxes and penalty, it might be worth it to make a short term loan from somewhere else, since the interest may be less than the taxes you will owe.

If you do this, you must let the plan that is receiving the funds know before you make the contribution, that it is a rollover contribution due to an offset distribution, and not a regular contribution.  The rollover contribution is not tax deductible, but it will allow you to avoid tax on the offset distribution.

[MayaD]

 You can repay your loan before the filing deadline to avoid penalty and the extra amount due.

Prior to the passage of the Tax Cuts and Jobs Act of 2017, participants who had left employment with an outstanding loan were expected to pay off the balance within 60 days of separation or face a 10% withdrawal penalty and have the distribution be considered taxable income. The Tax Cuts and Jobs Act of 2017 provides a greater repayment window, as individuals now have until the filing deadline of their individual tax return to avoid the tax consequences of a deemed distribution of an outstanding plan loan.