dmertz
Level 15

Retirement tax questions

Prior to making the distribution the employer is required to substantiate the immediate and heavy financial need.  That would generally preclude claiming any fraudulent reason.  For example, if you are claiming that the need is for medical expenses you would have to supply the employer with documentation such as bills or estimates from the medical service provider.

 

Substantiation Guidelines:  https://www.irs.gov/pub/foia/ig/spder/tege-04-0217-0008.pdf

 

Trust your conscience.  Making fraudulent claims to obtain a distribution of $1,000, of which you might probably only net something like $600 to $700 after federal and state taxes and early-distribution penalty, is ill advised.  Perhaps the plan allows for a 401(k) loan that you could obtain legitimately.

 

Note that it is a hardship distribution only if you are still working for the employer that provides the 401(k) plan.