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because the net pay due to petitioner was only $34.93.
Petitioner received a Form W-2, Wage and Tax Statement, from USAA
reflecting the January 2 payment as income for 2001.
In a statement dated January 16, 2001, USAA informed
petitioner that she had a vested balance of $11,929.32 and an
outstanding loan of $10,480.27 in her USAA SIP account as of that
date. Petitioner was informed that she had to pay her
outstanding loan balance by April 17, 2001, or it would be
considered in default and subject to Federal and/or State income
taxes. Petitioner was also informed that a 10-percent penalty
might apply. Petitioner did not pay the outstanding loan
balance.
As of March 31, 2001, petitioner had received a distribution
payment of $11,961.16 from her USAA SIP account, less $4,487.24
withheld for Federal income taxes. The balance of petitioner’s
USAA SIP account, $10,480.27, was applied to her outstanding loan
balance. USAA reported this transaction to petitioner and to the
Internal Revenue Service (IRS) on a Form 1099-R, Distribution
From Pensions, Annuities, Retirement or Profit-Sharing Plans,
IRAs, Insurance Contracts, etc., for 2001 as a taxable
distribution of $22,441.43 to petitioner.
Petitioner reported the USAA SIP distribution on her
Form 1040, U.S. Individual Income Tax Return, for 2001. The IRS
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Last modified: May 25, 2011