Can the 10% penalty on early withdrawals from retirement account be waived when it is partially for Education costs which were incurred by not paid in 2021?

Forum|Forum|4 years ago
March 5, 2022
4 replies
34 views

The money was taken from a 401K plan in an amount greater than the Tuition bill and the university gave a loan for equal installments originally payable in 2021 but deferred to May 2022.

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qbteachmt

Level 15

You should bookmark this table:

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions

While a hardship is accepted for distribution, that doesn't mean it avoids penalty.

https://www.irs.gov/retirement-plans/401k-plan-hardship-distributions-consider-the-consequences

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A

AnmarieAAuthor

Level 5

What is confusing is the first bookmark says education hardships from 401K plans NOT exempt from the 10% penalty in the table but exempt is distribution taken from IRA. The code on the 1099-R also does not reference hardship so will it need to be corrected. I read these links already and the words appear to contradict the table. I am looking for more clarity on the matter. Also since the loan repayment was then deferred until May 2022 and made no payments in 2021. Does the repayment matter need to have occurred?

sjrcpa

Level 15

401(k) and IRA get different treatment for some things.

The more I know the more I don’t know.

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