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My client withdrew from 401k for first time home buyer, distribution code says 1, in order to avoid the penalty it should be J, company only uses 1 or 7, age dependent. Only override I see is if it should have been a J but from a Roth. The IRS says specific circumstances, is that just from a Roth? The amount was under the $10,000 specified for the program.
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The first-time homebuyer exception only applies to IRA distributions, not 401(k) distributions. Your client owes the penalty.
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Hopefully the client didn't contact you for advice about this before they did it, and you told them they could take the money from a 401k without penalty.....401k withdrawals don't qualify, has to be an IRA.
♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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To qualify for the 401k penalty waiver, regarding Financial hardship you can include medical costs