Will I have to pay taxes on 401K money w/d due to hardship on disability?

Question

Had very little earned income (less $1,000.00) in 06. I was on disability all year due to injuries from a car accident. Ex wife came after me for things we agreed to verbally (I know my fault - should had court bless it) but she denied and was not in decree so I had to pay in excess of $30K. (By the way - I am NOT a deadbeat father - I am totally up to date on support etc..pay in excess of $1.2K/m+ for 6 years - and am very diligently - despite my ex's efforts to stay in my children's life's).

Back to? Will I have to pay fed/state tax on $ withdrawn from 401k for this? I had no other source. Believe I can prove hardship and/or the was on disability with basically no earned income for 06. Thanks in advance for feedback.

Answer 1

Withdrawals form a 401(k) are always taxed as ordinary income and should have been subject to withholding when paid. There is no way to avoid that, for any reason.

If you are totally and permanently disabled, you may be exempt from the additional 10% tax for early withdrawal. A disability that lasts for at least a year may be classifiable is permanent. If your doctor provides a statement of the permanent nature of your disability (permanent now, though that could improve in the future of course) you should be able to avoid the 10% penalty tax. That's the best that you can hope for.

Answer 2

You might not have to pay the 10% penalty for early withdrawal, but would still be liable for income tax on the amount withdrawn as ordinary income, since it wasn't taxed when it went into the 401K. The hardship situation might get you out of paying the early withdrawal penalty.

Answer 3

THATS WHAT YOU HAVE TO DO IS PROVE HARDSHIP CASE TO THE IRS

Answer 4

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