We have a new company administering our company's 401k plan. They have informed us that loans taken out should be repaid with after-tax money. It seems to me that if you repay with after-tax money, then when you retire and start to receive your pension, you would be taxed again on that money. What is the correct way, and is there an IRS regulation I can read?
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taxes on 401k loans
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taxes on 401k loans |
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Posts: 0 (01/04/07 16:12:27) |
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DCK101 |
Re: taxes on 401k loans | ||
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Posts: 414 (01/06/07 14:20:42) Elite Member |
Yes, participant loans may only be repaid with after-tax money. It is not a matter of finding a regulatory citation stating this is so, but rather the lack of any law or regulation that states the contrary! In other words, because there is no regulatory provision for making them with pre-tax dollars, the conclusion is they are made with after-tax dollars.
Yes, you will be taxed again on that money when you eventually take it out as a taxable distribution. Hopefully the old company administering the plan did not accept loan repayments on a pre-tax basis! That would give rise to conditions of under-reported taxable income, penalties and late fees! |
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InfoNeeded33 |
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Posts: 1 (08/04/08 08:28:23) |
Can you repay 401k loan with credit card deposit into bank where you can deposit check from CC and use for whatever? Is that a violation to use in repayment of
401k loan, that was used for primary residence closing costs (401k money that is). Thanks!
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