Table of Contents
- Can I Default on a TSP Loan?
- What Happens if You Don’t Pay a TSP Loan?
- How Do I Stop a TSP Loan Payment?
- What is the Penalty for TSP Loan?
Can I Default on a TSP Loan?
Yes, you can default on a Thrift Savings Plan (TSP) loan. When you default on a TSP loan, the amount you owe is considered taxable income. This means that you will be taxed on the amount of the TSP loan, plus any interest accrued since the loan was taken out. Additionally, the Internal Revenue Service (IRS) may charge a 10 percent penalty for defaulting on the loan.
What Happens if You Don’t Pay a TSP Loan?
If you do not pay a TSP loan, the loan will be considered in default. Once a loan is in default, the loan balance and any interest that has accrued will be considered taxable income. Additionally, the IRS may charge a 10 percent penalty for defaulting on the loan. The TSP will also place a tax lien on your account, meaning that the TSP will take any money that is in your account to pay off the loan. Lastly, the TSP may garnish your wages in order to recover the amount owed.
How Do I Stop a TSP Loan Payment?
You can stop a TSP loan payment by completing the TSP-20 form. This form is available on the TSP website. On the form, you need to include the reason why you want to stop the loan repayment and the date of your last loan payment. Once the form is completed and submitted, the TSP will stop deducting payments from your account.
What is the Penalty for TSP Loan?
If you default on a TSP loan, the amount you owe is considered taxable income. This means that you will be taxed on the amount of the TSP loan, plus any interest accrued since the loan was taken out. Additionally, the Internal Revenue Service (IRS) may charge a 10 percent penalty for defaulting on the loan.