where do I enter info for exemption of 10% penalty on early 401K withdrawal?

[Jane-o]

Client did early wihdrawal for purchase of personal residence. Gave all necessary info to payer and declared a hardship.  The payers' code is 1 so how do I avoid him paying he 10% penalty due to hardship?

[IRonMaN · Accepted solution]

Check out form 5329

[Jane-o]

Thank you!!

[IRonMaN]

You betcha!

[TaxGuyBill]

A "hardship" only allows the money to be withdrawn.  That does NOT waive the penalty.

But as was mentioned, you can see if the taxpayer has any qualifying reasons to waive the penalty on Form 5329.

[IRonMaN]

Withdrawal was to buy a house -------- I am assuming Jane knows that they have to qualify as first time buyers to qualify.

[qbteachmt]

Hardship and Home Purchase are two different provisions, if you are referring to First Time Homebuyer; or Disaster Home?

[rbynaker]

Did something change?  The first-time homebuyer penalty exception used to only apply to IRA withdrawals, not 401k withdrawals.

[Just-Lisa-Now-]

NO penalty exception for the situation you described, sorry. Had to be an IRA to waive penalty on the first 10,000 for a first time home purchase.

[IRonMaN]

For my second oops of today - I missed the 401k part of the question.

[rcooley25]

You and I had the sames question about the same time.