401k Early Withdrawal Penalty

[SIGARM]

In May 2019 I took out a $50k loan with 10 year payment plan from my 401k to use towards a down payment for a home purchase. Unfortunately in December 2020 I was laid off from my job, and in January 2021 my former employer demanded repayment of the outstanding loan balance of $44k within 30 days but I could not afford to. I ended up being unemployed for over 8 months and didn't have the funds to put $44k towards another retirement account by the end of 2021 in order to mitigate the tax penalty consequences. Do I have any options here or am I stuck footing the bill for the tax penalty despite my unemployment situation? Thanks for your help!

[AmyC · Accepted solution]

Probably not, unfortunately the Pandemic caused many people to default on the retirement plan loans. The new tax laws do relieve you from the 10% penalty, if it is COVID related. See Coronavirus-related relief for retirement plans and IRAs. Follow through the program and answer the questions after entering the 1099-R.