Hello...my name is XXXXX XXXXX I am a Certified Public Accountant. I look forward to assisting you with your tax question.
A loan that is taken from your 401(k) is not a taxable distribution and therefore, there won't be any taxes due on the $4,000. If you default on the loan repayments then it will be considered a taxable distribution at that time.
Hello Joshua...I am happy to assist you. Can you see my response above?
I see...so you are talking about a full distribution of the $27,000 and the $4,000?
Okay...then you would be looking at a distribution of $31,000. This amount would be fully taxable and would also be subject to a 10% penalty. Therefore, you would net after taxes and penalty in the range of $25,000 (may be higher or lower depending on any tax deductions you may qualify for).
Thank you! You as well!