My boyfriend is trying to do a hardship withdraw on his 401k plan due to hardship, is back taxes a hardship? ?

Question

my borfriend is trying to do a hardship withdraw on his 401k because he owes back taxes and the town put a lein on his home. is'nt that considered a hardship because eventually he can lose his home if he does'nt pay his back taxes?

Answer 1

No, this is something he decided he wanted himself.  He refused to pay his taxes, there fore they are still due.

Hardships are things that happen to you against your will.   Major illness (cancer, stroke, etc) are hardships.   Being laid off (but not fired) is a hardship.  

Blowing your money is not a hardship, it is a life style choice.

Answer 2

No. He can't lose his home for taxes in most states.  You have to re-negotiate a go-forward financial situation, declare bankruptcy,etc but should not lose house for taxes.  Maybe for mortgage, not taxes, in my opinion.

Here's the IRS code; link in sources.

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EP Examination Process Guide - Section 9 - Participant Rights - Participant Events - If a Participant Requests a Hardship Withdrawal

  

If a participant requests a hardship withdrawal, there are some documents that are required to satisfy the hardship withdrawal requirements.

Description: To receive a hardship withdrawal from an IRC section 401(k) or 403(b)plan, the withdrawal must meet certain criteria. The plan should require proof that the criteria have been met.

What It Should Contain: Hardship withdrawals are only permitted if there is an immediate and heavy financial need and other resources are not reasonably available to meet the need. The participant should be notified of what documentation is required to demonstrate a hardship. Please refer to Treasury Reg. Section 1.401(k)-1(d)(2) for more information.

Timing: A participant should receive a description of the documentation required for a hardship withdraw upon request.

Who Is Responsible For Sending It: The administrator of the plan.

  

========exceptions to tax===============

Exceptions to tax.    Certain early distributions are excepted from the early distribution tax. If the payer knows that an exception applies to your early distribution, distribution code “2,” “3,” or “4” should be shown in box 7 of your Form 1099-R and you do not have to report the distribution on Form 5329. If an exception applies but distribution code “1” (early distribution, no known exception) is shown in box 7, you must file Form 5329. Enter the taxable amount of the distribution shown in box 2a of your Form 1099-R on line 1 of Form 5329. On line 2, enter the amount that can be excluded and the exception number shown in the Form 5329 instructions.

Answer 3

I only know one thing...... you need to distance yourself from this guy

Answer 4

Is the lien for income taxes or property taxes.  He could lose the home for unpaid property taxes, but not unpaid income taxes.  It is his fault for not paying his taxes.  Creditors cannot touch his 401k and he would owe income tax on that at his highest tax rate if withdrawn, so where would that leave him?