Are Hardship Withdrawals Taxed?

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.

Are 401k hardship withdrawals penalized?

Hardship withdrawals are subject to income tax and, if you are not at least 59½ years of age, the 10% withdrawal penalty. You do not have to pay the withdrawal amount back. A hardship distribution may not exceed the amount of the need.

Does the IRS audit hardship withdrawal?

IRS: Self-Certification Permitted for Hardship Withdrawals From Retirement Accounts. ... Employees do, however, need to keep source documents, such as bills that resulted in the need for hardship withdrawals, in case employers are audited by the IRS, the agency said.