If the taxpayer is over 59, would there be a 10% penalty on this loan??
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Yes
There if he defaulted the loan. This happends alot if they are on automatic payments when the last payment is due if it is a higher or lower amount the the normal payment thye will contact the client to have premission to take out the odd payment many clients do not answer back so they default the last payment of the loan and recieve the nice penalty for early withdrawl -
even if over 59 ?? why??Comment
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Probably because he made the loan before he was 59 1/2. So it is a deemed distribution at the time the loan was made, if default occurs.Last edited by Burke; 02-20-2009, 06:05 PM.Comment
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even at 59
Burke is correct all the companies that I have worked with use the date the took the loan not the current date so it matters how old they were when the loan was taken.Comment
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So,
if he was over 59 1/2 when he took the loan, no 10% penalty??Comment
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yeppers
That would be correct in my expirence but each company has different rulse iln their contract so make sure that you can contact the company about their contract.Comment
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The company does not make the rules on the 10% penalty for deemed distributions on defaulted loans. It is an IRS rule. If he made the loan after 59 1/2, there should be no penalty on it, if it should subsequently be determined a deemed distribution because he did not pay it back.Comment
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