Tax penalities on early withdrawal

[SLWright]

Wisconsin

I am leaving my current employeer and have a loan out on my profit sharing plan. I have 60 days to pay in full or take penalities. What is penalized?? The origional amount the balance of the loan etc. Also am I also taxed at the end of the year with Income takes.

 

[loku]

Loan for qualified plan

Unless you pay by the 60 days, you will be subject to a penalty of 10% of the amount of the loan. It is called a penalty for early withdrawal, and it applies to most withdrawals of people who are under 59-1/2.

Also, if you do not repay the loan in the 60 day period, you have to pay income tax on the amount: it is taxable income. Enter the total amount on line 16a of Form 1040 or line 12a of Form 1040A, and on on line 16b of Form 1040 or line 12b of Form 1040A.