Level 2

401 Hardship withdrawal

Forum|Forum|2 years ago
February 11, 2024
3 replies
5 views

A taxpayer (Under 59.5) took a 401k hardship withdrawal for their dependent child's college tuition which is an exception to the 10% penalty. However the 1099R was coded 1 (Early Distribution, No Known Exception) in Distribution box 7 making the software included the 10% penalty. Did the Administrator code it incorrectly or is there a different way in the software to make it so it does not include the penalty?

Thank you.

This topic has been closed for replies.

BobKamman

Level 15

Form 5329, Line 2, Exception 8 might apply.

rbynaker

Level 13

@BobKamman wrote:

Form 5329, Line 2, Exception 8 might apply.

Did the law change? Or are we assuming that the OP wrote 401k but really meant IRA?

S

ST2Author

Level 2

It was a hardship withdrawal from his employers 401k.

Camp1040

Level 10

As Bob said, you have to complete form 5329 and select which exclusion applies from the drop down list for line 2.

The 1099 administrator has no idea if your client qualifies for an exception.

Camp1040

Level 10

To @ST2

I did my homework, the administrator for the 401K can allow a distribution for higher education expenses but the distribution does not meet any 401-K exceptions from the 10% penalty.

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