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1099-R Education Hardship Withdrawal

I took out money from a hardship withdrawal from my 401-K to pay for my daugher’s college. I sent in all of the forms and was approved by Prudential. They sent me the 1099-R with a 1 in box 7. Turbo Tax does not ask me anywhere in the questions if this was for educational reasons. I’ve already paid all the taxes upfront and the penalty should be waived correct?

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2 Replies

1099-R Education Hardship Withdrawal

There is no exception to the 10% early distribution penalty for a distribution from a 401(k) to pay education expenses.

See IRS Tax Topic - https://www.irs.gov/taxtopics/tc558

Hal_Al
Level 15

1099-R Education Hardship Withdrawal

The 10% early distribution penalty is not waived for a general hardship.  You still have to meet the standard penalty exceptions.  Although education is a penalty exception for IRAs, it is not for 401k plans. 

Reference: https://www.investopedia.com/retirement/relief-401k-hardship-withdrawals/

 

Furthermore, you did not "already paid all the taxes upfront".  What you paid was only withholding, an estimate of the tax and penalty due. No piece of income is taxed individually. All your income, including pension plan distributions, is added together at tax filing time. The tax is calculated on that total (after adjustments, deductions, exemptions and credits). Then withholding is subtracted to determine if you owe more or get a refund.

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