dmertz
Level 15

Retirement tax questions

Using the money to pay for school is not an exception to the early-distribution penalty on a distribution from a 401(k).  That exception only applies to distributions from IRAs.  A 401(k) is not an IRA.  If the IRS is assessing an early-distribution penalty, you owe the penalty and you can just pay it unless you have some other exception that applies that could be reported on From 5329.