Early Distribution Penalty

Forum|Forum|4 years ago
February 4, 2022
3 replies
19 views

I was unemployed and took distributions from my 401(k) to pay for household expenses. When I had my distributions made they were going to be for college expenses, but was able to do so. Can I avoid the early withdrawal penalty by having the classified as a hardship distribution? If so, how do I make that happen?

DaveF1006

Level 15

it depends. Were you able to use these as college expenses or not. I couldn't tell from your statement. If not, there are certain hardships that will allow you to withdraw from your plan. Please read the following link published by the IRS. Look under 401K to see what hardships are exceptions.

If your 1099R has a code 1, as you enter your 1099R, there will be a section that will say Let's See If We Can Lower Your Tax Bill. Next screen are the exceptions that are allowed for your 401K distribution to be considered a hardship. Here is what that screen looks like.

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SweetieJean

Alumni - Champ

Be aware that a "hardship" withdrawal as allowed by the plan documents is not necessarily considered as a hardship by the IRS.

dmertz

Level 15

There is no penalty exception for "hardship" (other than hardship distributions received as 2021 qualified disaster distributions reportable on Form 8915-F).