I was laid-off from my job after 6.5 years. Like most people we were working paycheck to paycheck. I was paid quite well and knew I would need to pay down monthly pay out debt so I closed out both of my 401s. I couldn't just take a loan because I already had loaned to the max.

My questions are: would this qualify me for a hardship, I am 55 years old? What will I owe in back taxes and penalties. Out of my biggest 401 they did take 20% for taxes and I put away 10% for penalties. Thanks

Your age (55) MAY allow you to avoid the 10% Early Withdrawal Penalty. It depends on the nature of HOW you lost your job.

You will owe income tax on the value of the loans you had outstanding as well as the amount that was left over that you then cashed out. So the 20% they withheld (which I assume was only on the portion still in the account when you closed it) may not be enough.

You can avoid the 10% early withdrawal penalty if you were 55 or older when you were "separated from service."

Agreed. I suspect that you will pay probably about another 10% in taxes even without the 10% Early Withdrawal Penalty.