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michelel
New Member

Reporting 401k loan as income and wonder how the tax penalty is calculated? is it from the original loan balance or what is owed now?

 
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dmertz
Level 15

Reporting 401k loan as income and wonder how the tax penalty is calculated? is it from the original loan balance or what is owed now?

The early-distribution penalty is 10% of the taxable amount of the deemed distribution or offset distribution.  The deemed distribution or offset distribution is the outstanding balance on the loan, not the original loan amount.

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1 Reply
dmertz
Level 15

Reporting 401k loan as income and wonder how the tax penalty is calculated? is it from the original loan balance or what is owed now?

The early-distribution penalty is 10% of the taxable amount of the deemed distribution or offset distribution.  The deemed distribution or offset distribution is the outstanding balance on the loan, not the original loan amount.

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