How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Bill Your Own Question
Bill, Enrolled Agent
Category: Tax
Satisfied Customers: 3153
Experience:  EA, CEBS - 35 years experience providing financial advice
Type Your Tax Question Here...
Bill is online now
A new question is answered every 9 seconds

I defaulted on a loan that was secured and paid back through

Customer Question

I defaulted on a loan that was secured and paid back through my 403b retirement account. Is the amount paid back considered taxable income? If so, can this income be sheltered? Is there a way to avoid the IRS penalty?
Submitted: 1 year ago.
Category: Tax
Expert:  Bill replied 1 year ago.
How long ago was the default? If it was last year, did you receive a 1099-R? Are you still working for the employer who sponsors the 403(b)?
Customer: replied 1 year ago.
Yes it was last year, I did receive a 1099-R and I am still working for that employer.
Expert:  Bill replied 1 year ago.
Unfortunately, it is taxable and if you are under age 59 1/2 there is also a 10% penalty. I assume there is a code L and 1 in box 7. Depending on your filing status and the level of your income you may be able to reduce your income by making a deductible IRA contribution. If you are eligible, then you could contribute and deduct up to $5,500 ($6,500 if age 50 or over). However, if you intend to do this, it must be done tomorrow to be able to deduct on your 2015 tax return.
Customer: replied 1 year ago.
How do I make a contribution to an IRA? Do I need to start an IRA account?
Expert:  Bill replied 1 year ago.
There are a number of ways. You could go to a bank or investment brokerage firm and open and fund it tomorrow. You could also contact a number of no-load mutual funds either online or via telephone and open an account. There is still time to do it. If you file single and your modified adjusted gross income was less than $61,000 last year, then you are eligible for the full deduction amount.