AboutDavid M Iannopollo Expertise I am a professional financial advisor who can assist you with answers on mutual funds, annuities, IRA's, rollovers, qualified and non-qualified retirement plans, retirement planning, educational planning, life, disability and LTC insurances.
Experience I have over 20 years experience in the business and financial world.
Question QUESTION: I want to take a hardship withdrawal from my 401k account through my employer. My home is in foreclosure and I have the documents to support this for the withdrawal. My employer required that I first take a loan for half of the amount in this account and now will be allowed to take the other half through hardship. All of the funds in this account were rolled over from a QDRO account through my divorce one year ago. Will I be subject to any taxes on this early withdrawal?
ANSWER: Hi Ellen,
A hardship withdrawal only allows you to avoid the 10% early withdrawal penalty. You will still be subject to ordinary income tax on any amount withdrawn. It will be reported to the IRS so there really is now way around the taxes. Keep in mind, this will increase your tax liability for the year so you should consult with an accountant to avoid any surprises. Sorry I couldn't bring better news but I wish you the best of luck with your situation.
Dave
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QUESTION: Dave
My retirement company is telling me that 20% will be taken right off the top of the amount I want to withdraw, they withhold it for the IRS. Does that sound right to you. Am I again taxed when I file my next years income taxes?
Thanks for your response.
Answer That's correct, I forgot to mention that. They will withhold 20% for fed tax and depending on your tax bracket, you could owe more or less when you file. If you bracket is below 20%, you'll get a refund. You could also owe state tax depending on your state. They don't make early withdrawals very pleasant!
