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day26 · Sep 21, 2009, 09:44 AM

I was laid off in May form my company. My 401k was placed into an account at heiwitt and I am now in need to request a payment due to hardship. Is there a way to waiver th 10% tax penalty?

ebaines · Sep 21, 2009, 10:52 AM

The only exceptions to having to pay the 10% early withdrawal penalty for people under 59-1/2 years of age are:

• Distributions after your separation from service in or after the year you reached age 55 (age 50 for qualified public safety employees).
• Distributions made as part of a series of substantially equal periodic payments (made at least annually) for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and your designated beneficiary (if from an employer, the payments must begin after separation from service) - this is known as a section 72(t) withdrawal
• Distributions due to total and permanent disability.
• Distributions due to death (you are the beneficiary of a deceased plan participant).
• You have unreimbursed medical expenses that are more than 7.5% of your adjusted gross income.
• Distributions to an alternate payee under a qualified domestic relations order.
• Distributions due to an IRS levy of the plan.
• Distributions to reservists while serving on active duty for at least 180 days.

Note that there is no excluson for "hardship" per se.

seagull2012 · Jun 20, 2012, 11:37 PM

I had heard that there is also a waiver for first home purchase. Is that true?

Also, if it is, does it apply for foreign nationals, who are returning to their home country and buying their first home in their home country?

ebaines · Jun 21, 2012, 05:51 AM

Originally Posted by seagull2012

I had heard that there is also a waiver for first home purchase. Is that true?

Also, if it is, does it apply for foreign nationals, who are returning to their home country and buying their first home in their home country?

If the withdrawal is from a 401(k) there is no exception to the 10% early withdrawal penalty for home purchase. But if it's from an IRA then yes - up to $10K may be exempt if the withdrawal is used to purchase a first home. Just to confuse the issue - taking money from a 401(k) to help finance the purchase of a home is considered a "hardship" withdrawal, and as such your employer is required to allow you to make such a withdrawal if you want. However - that does not mean that the money is exempt either from the 10% penalty or income tax.

As for withdrawals by foreign nationals - be aware that 30% will be withheld for taxes on withdrawals.

seagull2012 · Jun 22, 2012, 10:52 PM

Hi,

Thank you for the response. So for the IRA withdrawal, can I use this money to buy the land for my home? What paperwork do I need to submit for that?

Please let me know.

Thanks!

ebaines · Jun 23, 2012, 06:48 PM

Originally Posted by seagull2012

So for the IRA withdrawal, can I use this money to buy the land for my home? What paperwork do I need to submit for that?!

Yes, you should be able to use a withdrawal from an IRA to pay for land that will be used to buy or build your first-time home, up to $10K, without the 10% early withdrawal penalty. I suggest you call your IRA custodian to ask how this works.