Question

I needed to take an early distribution from my 401(k), which my 401k plan allows. Since the withdrawal was a hardship 401k distribution, and it was allowed under the terms of my plan, am I exempt from the 10% early withdrawal penalty?

Answer

No. Many 401(k) plans allow you to take hardship distributions, however, the IRS doesn’t have an early withdrawal from 401k hardship exception to its early withdrawal penalty. Even if you’re allowed to take the 401(k) withdrawal under your plan, you’d still have to qualify for another exception to avoid the 10% early withdrawal penalty.

To learn more about early withdrawal penalty exceptions, see the instructions for Form 5329 at www.irs.gov.

Related Topics

Related Resources

IRS Letter 3572A – Your Federal Income Tax Return Has Been Selected for Examination

Learn more about letter 3572A and how to handle an IRS audit of your business return with help from the tax experts at H&R Block.

How to Know If You’re an Employee or a Contractor – and Why It Matters

If your employer says you’re an independent contractor, but you think you’re an employee, you may be surprised by a large tax bill when you file. Learn about your options to fix this issue from the tax experts at H&R Block.

What is Form 1040a

Learn more about the tax form 1040a and what income, adjustments, and credits you can file from the experts at H&R Block.