If you take money out in the form of a withdrawal (not a loan) you have to include it as income on your tax return in the year you took it out. In addition, if you are under age 59 1/2 you will incur a 10% penalty of the amount you took out on your tax return. A loan is better, but if you don't pay the loan back, the above will apply. If this is a former employer you can withdraw the money and roll it directly into an IRA without paying income taxes or incurring a penalty. Your HR dept. or former employer HR dept should be able to provide you with addtional details.
