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I have a self direct 401k account. I used part of it as down…

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I have a self...

I have a self direct 401k account. I used part of it as down payment to purchase a home. i am paying X amount of dollars back per month on the account. If I want to pay the taxes of the 401k account and be totally in charge to do what I want with the monies, what would I needed to do.

Submitted: 3 months ago.Category: Tax
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Answered in 52 minutes by:
3/30/2018
Tax Professional: Lev, Tax Advisor replied 3 months ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,131
Experience: Taxes, Immigration, Labor Relations
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You might be aware that there are some prohibited transactions related to qualified retirement plans.

Specifically - Prohibited transactions generally include the following transactions:

  1. A disqualified person’s transfer of plan income or assets to, or use of them by or for his or her benefit
  2. A fiduciary’s act by which he or she deals with plan income or assets in his or her own interest
  3. A fiduciary’s receipt of consideration for his or her own account in a transaction that involves plan income or assets from any party dealing with the plan
  4. Any of the following acts between the plan and a disqualified person:
  • Selling, exchanging, or leasing property
  • Lending money or extending credit
  • Furnishing goods, services or facilities

Using funds for personal purposes and paying back will disqualify your 401k plan - and the whole value in 401k plan may be classified as deemed distribution.

You will need to communicate with the administrator of yours 401k account and might be able to make some corrections - but the money you took out will be reported as taxable distribution on form 1099R.

Let me know if you need any help.

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Tax Professional: Lev, Tax Advisor replied 3 months ago

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Experts are ONLY credited when answers are rated positively.If you still have any doubts, need clarification - please be sure to ask.I am here to help you with all Social Security / Tax related issues.
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