Loan Repayments Can Be Produced Up Without Being Taxed

An interior Revenue Service (IRS) Chief Counsel Advice memo issued to help counsel in another of the agency’s regional workplaces prov

The memo, dated August 30, provides two illustrations sexactly howing how missed installments could be comprised without penalty. One makes use of a later on, bigger re re payment plus the other employs an alternative loan. Both circumstances happen inside the plan’s that is hypothetical loan remedy duration.

Two Examples Provided

Both examples are derived from the reality that: (1) the 401(k) plan in question allows plan loans and permits for a remedy duration; and (2) that on January 1, 2018, the participant obtains a strategy loan that will not go beyond the permitted limitation on such loans, just isn’t a mortgage, includes a lawfully enforceable contract, and it is repayable in equal installments by the end of every month for the contract, which will be amortized over 5 years.

The plan’s cure period lets a participant make up a missed installment payment by the last day of the calendar quarter after the calendar quarter in which the installment was due in this case.

The amount of the loan will be treated as having been received by the participant as a distribution from the plan as background, the federal tax code’s Section 72(p), which governs plan loans, provides that if a participant receives (directly or indirectly) a loan from a qualified employer retirement plan. Read more ›

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