Different Expert here. I'm Anne. I've been preparing taxes for 29 years, and I'll be happy to help you.
You have not provided enough information for us to answer your question or help you yet, and here's why I say that:
A loan is NOT considered to be income unless or until you default on it. Additionally, you can only be penalized on INCOME, and NOT on a "loan" So if, as you say, you paid the penalty, then MetLife must have considered at least part of the distribution to be a withdrawal.
In order for us to help you, we need to know what MetLife considers the distribution......is it income, subject to tax and penalty, or, is it a loan........it almost sounds as if they treated at least part of the distribution as taxable income (withdrawal) and part as a loan......
Regardless of how MetLife reports the distribution, (hardship withdrawal, or loan) your true problem lies with MetLife. As tax experts, we can not change/correct a reporting document. You need to find out how MetLife is reporting the distribution to the IRS.
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