Withdrawals from a 401k are considered taxable income. However, if you are under 59 1/2, the IRS will charge an additional early withdrawal penalty for taking a withdrawal early. The penalty can be waived if you meet certain criteria. Per the IRS, "plans may allow a hardship distribution to pay for your, your spouse’s, your dependents’ or your primary plan beneficiary’s":
- medical expenses,
- funeral expenses, or
- tuition and related educational expenses
When entering into TurboTax if you entered this as a hardship distribution, the early withdrawal penalty was removed but the withdrawal amount is still subject to income tax.
For more information, see the link below:
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