Disability and 401-k withdrawal

[mikemax1977]

I have been on long term disability through unum since 2014. They stopped payment in May 2016 because my plan only covered 2 years. i had to withdraw my 401-k to pay the bills in july of 2016. I went before a disability judge in January 2017 and I am currently waiting for a written decision from that hearing. I have been disabled since 2014 with no gainful employment and have chronic condition that will effect me for the rest of my life along with spinal issues. Will i qualify for the exception of the early distribution penalty?

[hm115546]

A physician did determine I was disabled and I was out of work for 4 years. My condition improved unexpectedly and I'm having a trial to go back to a different line of work. Do I need to amend and pay the 10%

[DexterS · Accepted solution]

Yes, your distribution from a 401-K can be exempt from the 10% penalty due to disability. 

IRS 590b says:

Disabled.

If you become disabled before you reach age 59 1/2, any distributions from your traditional IRA because of your disability are not subject to the 10% additional tax.

You are considered disabled if you can furnish proof that you cannot do any substantial gainful activity because

of your physical or mental condition. A physician must determine that your condition can be expected to result in

death or to be of long, continued, and indefinite duration.

Unfortunately, this only applies to the penalty, you will still be subject to tax on the distribution to the extent it has not previously been taxed.

[crelfe]

How do you Amend a previous year's return to recoup the 10%?