IRA Rollover

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Question: How do you rollover a 401k into an IRA if there is a loan against the 401k?

I just got laid off and I have to pay back $14k into my company 401k in a month.

What are my options so I avoid the tax and penalties if I don’t pay on time? I heard I can rollover the difference into a rollover IRA. Is this true?

Answer: If you do not payback the loan, then unfortunately it will become a taxable distribution. This means that when you file your income taxes the outstanding loan balance will need to be included in your Gross Income. How this affects your return will depend on what tax bracket you fall into. Also, depending on your age, you may have to pay a 10% penalty on the distribution ($1,400).

For more information, I would seek the opinion of a tax professional on your individual tax situation.

Self Directed IRAs Part 1 of 5 (New)