***all you smart 401k people**** help me out with ur knowledge!?

Question

hello...
i need some help.
i took out a loan a few months ago, for $1200, with a $50 charge for the application. i have been paying it back since then, and dont know how much i still owe. I am resigning from this job ( government job ) in November, due to reloacting.
I know i will be given the option to cash out on my loan or repay it or something like that. If i cash out, i will get penalized when i do my taxes in Jan. I make just under 33,000/yr. with 2 dependants. my child and myself. i always get a refund.
my question is... what is the difference in the amount i will be taxed if i dont pay the loan back in full, or if i just cash out all together...!!??!!
(( i already know i shouldnt cash out, cuz of the future, bla bla bla, etc. ))
i just want to know what my options are. i still want to recieve my tax return, since its something that is always useful and helpful to me, since i am a single parent.
the more thurough your answer, the better.
thanks for your help people!

Answer 1

If you cash out your 401K, or don't pay back your loan which is the same as taking that much cash out, then you'll owe income tax for 2007 on the amount you withdraw, plus a penalty of 10% of the amount withdrawn. You'd pay that when you file your tax return unless you have enough withheld from the withdrawal, so it would affect your refund.

Answer 2

When you leave the job, any outstanding loans against your 401(k) must be paid back or the unpaid balance will be treated as an early distribution. That amount is fully taxable as ordinary income. In addition, if you're under age 59 1/2 you will pay a 10% penalty on the early distribution.

Answer 3

I am not sure if you mean you took money out of your 401k? Anyway if you can afford paying it off then definitely do that. Find out how much you owe, it'll give you more incentive to pay it off.


Roll your 401k over into an IRA. Then you are still taken care of in the future, and you'll get your tax return.