Repayment of 401k loan

[elfling]

Mind is too tired . . .

Client borrowed nearly 26K from 401k, reported on 1099R as fully taxable, box 7 code 1.

Making set periodic repayments through payroll deduction.

My thought is "so what?" A taxable distribution is just that, taxable.

I don't recall ever learning (or reading) that repayments can be deducted anywhere on a current return.

What say some of you? If the repayment does make a difference, please point me in the right direction for some back up in pirnt.

Thanks,

Elfling

[Janitor Bob]

Mind is too tired . . .

Client borrowed nearly 26K from 401k, reported on 1099R as fully taxable, box 7 code 1.

Making set periodic repayments through payroll deduction.

My thought is "so what?" A taxable distribution is just that, taxable.

I don't recall ever learning (or reading) that repayments can be deducted anywhere on a current return.

What say some of you? If the repayment does make a difference, please point me in the right direction for some back up in pirnt.

Thanks,

Elfling

401k loans are not taxable income unless you default on payments.....Either client is not telling full story or issuer of the 1099 needs to correct.

[jklcpa]

Actually, loans from qualified plans are taxable distributions unless certain exceptions are met. Perhaps your client failed to meet one of the qualifications or the loan proceeds exceeded the lesser of $50K or 1/2 the PV (but not < $10K) of participant's vested benefits.

You can read this in CCH Master Tax Guide at para 2164, or directly in code sec 72(p) - Loans Treated as Distributions. Also reg 1.72(p)-1, Q&A-4, -9 & -10

Repayments shouldn't affect the tax return.