Loan Mishap With 401(k) Plan Justifies Tax Refund, Worker Claims

The IRS should fulfill a taxpayer’s refund request after an alleged error by his retirement account administrator caused him to pay income tax liabilities for a paid-off loan, the taxpayer told a federal court in Kansas City, Mo.

Steven Wahlen took out a loan on his 401(k) retirement plan in March 2021 before leaving his employer, Ferrellgas, about two months later. On the advice of the account’s administrator, Empower, Wahlen left $75,000 in the 401(k) to pay off his loan, which was satisfied by July 21 of that year, he told the US District Court for the Western District of ...