ETax847 Posted February 10, 2014 Report Share Posted February 10, 2014 A client age 30, withdrew from his 401k plan to buy his first home. Is there any way he can avoid the 10% early withdrawal penalty? The 1099R is coded with a Distribution Code 1 (early distribution, no known exception) The clien's CFO is telling him that it was a qualified distribution and there should be no penalty. Please help Quote Link to comment Share on other sites More sharing options...
mcb39 Posted February 10, 2014 Report Share Posted February 10, 2014 No, that exception only applies to IRA and Sep plans; never to 401K withdrawals. Just last week, we had a lengthy discussion of this subject. Quote Link to comment Share on other sites More sharing options...
ETax847 Posted February 10, 2014 Author Report Share Posted February 10, 2014 That's what I was thinking. I was just looking on the IRS.gov website to source the info. Thanks for your help. Quote Link to comment Share on other sites More sharing options...
Mr. Pencil Posted February 10, 2014 Report Share Posted February 10, 2014 I was just looking on the IRS.gov website to source the info. The exception is reported on Line 2 of Form 5329. See the Instructions for Form 5329. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted February 10, 2014 Report Share Posted February 10, 2014 It may have been a qualified distribution under the plan's rules, so the plan allowed him to withdraw money for that purpose (surprised it didn't require a loan). But not for tax purposes. Do a search on this forum. Quote Link to comment Share on other sites More sharing options...
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