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

Tax Lien Release

Get the facts from H&R Block about releasing a federal tax lien from your property after you've paid your IRS tax balance.

IRS Notice LT14 – You Have Past Due Taxes

Learn more about notice LT14, why you received it, and how to handle an IRS bill for unpaid tax with help from the tax experts at H&R Block.

Offset Tax Refund

Learn more about debt that can offset your tax refund from the tax experts at H&R Block.

Tax Transcript

Learn about the types of IRS transcripts and how you can use them to view information about your IRS account, income sources, and tax return history.