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I am considering taking a hardship withdrawal from my 401K,

Customer Question
I am considering taking...

I am considering taking a hardship withdrawal from my 401K, what is gross-up and will i be required to pay taxes on this as income?

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

I also have the option to choose federal tax withholding, what does this mean?

Accountant's Assistant: Is there anything else important you think the Accountant should know?

I would be using this for a down-payment on a home purchase for my primary residence.

Submitted: 1 month ago.Category: Tax
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3/15/2018
Tax Professional: Barbara, Enrolled Agent replied 1 month ago
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 5,811
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

Any withdrawal of funds from your 401K is subject to income tax. The standard federal withholding is 20% and if you are under 59 1/2, you will be subject to a 10% early withdrawal penalty.

You can choose a higher percentage of federal withholding depending on your other income.

A down payment on a home is not one of the exceptions to the early withdrawal penalty of 10%.

Please let me know if I can assist you further.

Thank you and best regards,

Barb

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Customer reply replied 1 month ago
What does gross- up mean?
Tax Professional: Barbara, Enrolled Agent replied 1 month ago

Taking a greater amount to compensate for the taxes withheld.

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Barbara
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 5,811
5,811 Satisfied Customers
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.

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