Loan Repayments Can Be Manufactured Up Without Being Taxed
An interior income provider (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 pictures showing how installment that is missed could be constructed without penalty. One makes use of a later on, bigger payment therefore the other employs an alternative loan. Both circumstances occur inside the plan’s that is hypothetical loan remedy period.
Two Examples Provided
Both examples depend on 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 restriction on such loans, is certainly not a mortgage, features a lawfully enforceable contract, and it is repayable in equal installments at the conclusion of every month of this contract, that will be amortized over 5 years.
In this situation, the plan’s remedy duration allows a participant make up a missed installment repayment by the final time for the calendar quarter following the calendar quarter when the installment ended up being due. […]