Question

Regarding Unemployment and 401K Loan Default

Forum|Forum|4 years ago
September 9, 2021
1 reply
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I got a loan towards my 401K while working on January 2020 so I am able to pay off my credit card debt due to high interest. I got the money on January 10 and payed off all of my debt, then COVID hit on March and I lost work and defaulted on the loan because I was having complication with unemployment at the time. When everything was done I wasn't able to start making the monthly payment and only option was to pay the entire thing off which was impossible. Now in 2021 I got info that Vanguard which handles my 401K release as a takeout I guess not sure and I don't mind the penalty for that but how can I make sure that it shows that I took out the money in Jan'2020 not in March 2021 while getting the Unemployment. I do have text and email which provides that information of the time and amount of the borrowed loan will this be enough and should I also do a one on one tax return as well for 2021 tax year.

O

OpeA1

Hello Valentino23!

I am sorry to hear of all the issues you are facing.

At the end of the year, you will receive a Form 1099- R. This form will list any money that was withdrawn from your 401(k). This will be for 2020 regardless of when (Jan. or March)

you took the money out. This is all you need to file with your 2021 taxes.

You will be access a penalty on the withdrawal if it is taken before you re 59 1/2 years of age.

I hope this is helpful!

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