I have a client who left his job due to back problems preventing him from performing his duties. He has been without a job for over a year and has taken 130k from his 401k (early distribution) to stay afloat. Are there any exceptions to the 10% penalty that could apply to this situation or is he stuck with a 13k penalty? I can find no exceptions that would apply here.
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check the medical portion of exceptions informationBelieve nothing you have not personally researched and verified. -
How old is your guy?Comment
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If he is 55 or older, he may qualify for an exception assuming the withdrawals were taken from a 401(k) (i.e., he did not roll to and IRA).Comment
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He is under the age of 55, his medical expenses are covered under his wife's employer plan and he is not considered totally and permanently disabled. Though his wife is employed, her income does not come close to covering their household expenses. The fact of the matter is that they live beyond their means which is why he felt he needed the money. Foolish I agree, but as their tax preparer I want to be sure I'm not missing anything that would avoid, or at least limit, the penalty.Comment
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Does anyone think that a hardship exception could apply? Without this money they would probably have been in foreclosure by now.Comment
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