Q. I am planning to separate from the U.S. Postal Service and would prefer a full withdrawal of my TSP balance. I have an outstanding loan that I cannot pay off and would prefer to just pay the taxes and any penalty. Do I have to wait the full 90 days for this loan to go into default, or can I request that an immediate taxable distribution be declared and have the loan closed? When the loan is closed, do I need to pay the taxes/penalties then or would I just declare them when I file my taxes at year end?
A. The loan will not be closed until the repayment deadline is reached and a withdrawal will not be processed from your account until the loan is closed. The taxes and penalty you owe for the distribution(s) will not be computed and due until you file your taxes.