A hardship withdrawal is a taxable event, so you will have a mandatory 20 percent withholding tax taken out of the check. You may also be subject to the 10 percent penalty if you are under age 55.

How do I avoid tax penalty on 401k withdrawal?

Here’s how to avoid 401(k) fees and penalties:

1. Avoid the 401(k) early withdrawal penalty.
2. Shop around for low-cost funds.
3. Read your 401(k) fee disclosure statement.
4. Don’t leave a job before you vest in the 401(k) plan.
5. Directly roll over your 401(k) to a new account.
6. Compare 401(k) loans to other borrowing options.

Can a hardship withdrawal be taken from a 401k?

Since the withdrawal was a hardship 401k distribution, and it was allowed under the terms of my plan, am I exempt from the 10% early withdrawal penalty? No. Many 401 (k) plans allow you to take hardship distributions, however, the IRS doesn’t have an early withdrawal from 401k hardship exception to its early withdrawal penalty.

Is the 10% penalty waived for hardship withdrawals?

The 10% penalty is waived for COVID-related hardship withdrawals, and you may spread out the tax payments on the amount borrowed over the course of three years. Who Qualifies for COVID-related 401(k) Hardships in 2021?

Do you have to pay penalty for withdrawal from 401k?

Hardship withdrawals from a 401(k) are not subject to a penalty if they are taken because of total and permanent disability or unreimbursed medical expenses up to a certain amount.

Is there an exemption for early withdrawal from a 401k?

Even if you’re allowed to take the 401 (k) withdrawal under your plan, you’d still have to qualify for another exception to avoid the 10% early withdrawal penalty. To learn more about early withdrawal penalty exceptions, see the instructions for Form 5329 at