Does your employer plan allow for a hardship withdrawal from the 401(k) while you are still working for the employer?

Instead of a withdrawal, where the taxable amount withdrawn will be entered on your tax return as ordinary income and taxed at your current tax rate, consider a loan from the plan if the plan allows loans.  The loan is not reported on a tax return as long as you are paying the loan back and do not default on the loan.

I already have a loan with them with only a small dollar amount left. However if I repay that loan I cannot get another for 60 days after they have received the final payment. Yes they do allow a hardship withdrawal while working for them. The plan is the thrift savings plan if that helps

The IRS has nothing to do with a hardship distribution from a 401(k) - the terms of the plan determine if it is allowed or not.  Ask the plan administrator.

See this IRS website for hardship withdrawals - <a rel="nofollow" target="_blank" href="https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-hardship-distributi...>
As stated if you make the withdrawal it is taxable and added to your other income on your tax return.  If you are not eligible for the exemption for an early withdrawal you will also incur a 10% early withdrawal penalty assessed on your tax return as a tax liability.

DoninGA I am aware of the penalties. I am more worried that IF I were audited the government shutdown (I am an essential employee) is a legitimate reason for the withdrawal. I will not be recieving at least one paycheck guaranteed this month and could go longer. Which would cause recurring negative cash flow.

Your plan administrator and the plan rules determine what is a legitimate hardship withdrawal, Not the IRS.

Ok thank you for your help.

Whether a hardship distribution is permissible under the plan depends more on the expense for which the 401(k) income is needed.  The loss of government income itself is not considered a hardship, it's the specific and immediate need for that income that establishes the hardship.  It would be no different than losing any other source of income.