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

What to Do If You Can’t Pay Taxes

What happens if you can’t pay your taxes on time? Learn more about late payment penalties and installment agreements from the tax experts at H&R Block

Missing 1099-R

Learn what to do if you are missing form 1099-R with advice from the tax experts at H&R block.

Direct Deposit Refund In Someone Else’s Account

If you’re hoping to direct deposit your tax refund into someone else’s account, you’ll find this is no longer available. Learn more from the experts at H&R Block.

Federal Tax Lien

Get the facts from H&R Block about federal tax liens. Learn when the IRS can file them, how they affect you, and how to avoid them with IRS payment options.