Q. I made a $50,000 loan to my TSP account. I separated from active-duty service. Now I’m being asked to pay the $40,000 remaining balance in full. If I allow the TSP to close the loan, can I move the funds to an IRA within two months after the loan is closed? If this is allowed, what IRA publication covers this transaction? Or would the best course of action be to pay the loan in full to TSP?
A. Like any other distribution, you are allowed to roll the declared distribution over to an IRA to within the usual time window to continue deferring the tax. Take a look here, and consider engaging a CPA to handle your taxes and provide you with guidance during the year(s) affected by the rollover. Federal income taxation is definitely not a do-it-yourself operation.