Diana

On the taxable portion, you will be hit with fed taxes, state taxes (if you live in a state with state income tax), and a 10% penalty… Expect that to be about 40% to 50% of the taxable portion.

Carolyn

The first 10k is not tax free or penalty free. It’s never tax free and it’s only penalty free if it comes from an IRA. You’ve been misinformed.

First let me say that it’s an absolute financial blunder to take this withdrawal. But if you’re going to do it at least you’re going to be informed about the rules and tax consequences.

Ok…first thing to know is that in a hardship situation you generally are limited to the amount that YOU put in. You can’t include earnings and you can’t include employer contributions. So you’re entire balance is irrelevent.

Second thing to know is that you are also limited to the amount of need. So you if you have 28k available but only need 20k then that’s all you can take. However, you can gross that amount up the taxes and penalties. Penalties would be 2k and taxes about 4k so you would be allowed to take 26k out. The will ask you how much you want to have withheld…so be mindful about the taxes and next April 15 when you figure this number out. Safe bet is 30%….

You will be taxed and penalized when you file your taxes for the next year. How much you are taxed is based upon your other financial details. If you have a lot of itemized deductions/ 401k deductions or other deductions then your taxes may be lower. Only you know that amount. Your penalty will be 10% of the distribution amount. This gets added to your taxes for a total tax number. If the amount that you had withheld from your regular paycheck plus the amount withheld from the hardship withdrawal is bigger than the net tax number then you will get a refund. If it’s smaller then obviously you’ll owe more in taxes.