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My husband cashed out his 401K for the purchase of a new…

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Hi, my husband cashed...

Hi, my husband cashed out his 401K for the purchase of a new house. We ended up losing the deal and did not buy the house. We hope to purchase again this year. More than 120 days have gone by between the withdrawal. Is there any way we can avoid the penalty?

Accountant's Assistant: The Accountant will know how to help. Is there anything else important you think the Accountant should know?

Just that. I want to know if we can still claim the exception even though we lost the house

Submitted: 3 months ago.Category: Tax
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4/1/2018
Tax Professional: Tax.appeal.168, Tax Accountant replied 3 months ago
Tax.appeal.168
Tax.appeal.168, Tax Accountant
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Tax Professional: Tax.appeal.168, Tax Accountant replied 3 months ago

In brief, unfortunately, there is no way to avoid taxation of the funds. In addition, if the funds were withdrawn prior to your husband being age 59-1/2, there will also be a 10% early withdrawal penalty. You can refer to the following IRS webpage for more details on early withdrawal exceptions.

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions

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