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    auntashell's Avatar
    auntashell Posts: 1, Reputation: 1
    New Member

    Dec 24, 2010, 08:30 AM
    401K Hardship and Disability Question
    In 2007 I lost my job after 20 years due to kidney failure and complications. Since we could not afford to be without my income, I cashed out my 401K to pay off my home and a credit card. I was awarded permanent disability in 2010. When I cashed out my 401K they would not let me claim a hardship, now that I have been awarded my disability can I get any of my 401K back based on the hardship they wouldn't let me claim in 2008. Also, do I have to pay taxes on my disability award?
    ScottGem's Avatar
    ScottGem Posts: 64,966, Reputation: 6056
    Computer Expert and Renaissance Man

    Dec 24, 2010, 09:08 AM

    First there is nothing to "get back". If you get a distribution of your 401(k) prior to retirement there is a 10% penalty. This penalty applies even if granted a hardship withdrawal. Hardship just allows the plan to issue the distribution. It doesn't preclude the penalty.

    The amount of the distribution become taxable income for year and you paid taxes on that income when you filed your 2007 return.

    Had you waited until your disability was approved, you might have been able to start withdrawals from the 401(k) under disability retirement. Since you didn't I don't believe you can go back to file an amended return. I would, however, consult a tax specialist to confirm this.
    ebaines's Avatar
    ebaines Posts: 12,131, Reputation: 1307

    Dec 25, 2010, 11:51 AM

    You always have to pay income taxes on all withdrawals from a 401(k) - no way around that. But if you had been permamently and totally disabled at the time you took the withdrawals you would not have had to pay the 10% early withdrawal penalty. Unfortunately there is no way to retroacctively apply your present disabled status to 2007. And just to make sure we cover all the bases - when you lost your job you were not 55 years of age or older, correct?

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