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?
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 Resources
Learn more about letter 2273C, why you received it, and how to handle an IRS 2273C letter with help from the tax experts at H&R Block.
Get the facts from H&R Block about IRS levies, which typically seize wages or funds from bank accounts to satisfy IRS tax debts.
Do you need to file estimated taxes each quarter? Learn more about quarterly tax payments and get tax answers at H&R Block.
Learn more about letter 545, why you received it, and how to handle an IRS 545 letter with help from the tax experts at H&R Block.
