Claiming refund for 401(k) withdrawal penalty

Submitted by Mega_Fry t3_10q60u3 in personalfinance

Hello, in December of 2021 I withdrew roughly 10,000 from my 401(k) to facilitate the purchase of my first home. The deal fell through in escrow for unrelated reasons and I ended up having to pay a penalty of about 1000 dollars. I ended up buying a house in the summer of 2022 and was wondering if I could claim a refund for the early withdrawal penalty. I normally file online but would it be best to talk to a CPA about this?

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nothlit t1_j6o22pi wrote

There is no 401k penalty exception for withdrawals related to buying a home. (There is for IRA, but not 401k.)

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meamemg t1_j6o2as3 wrote

And for IRAs, you only have 120 days to close from the withdrawal, so this wouldn't qualify even if it was from an IRA.

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Levertki1 t1_j6o7lr7 wrote

I figured they were screwed on days, but for this application what does “safe harbor” mean and principal residence is under there.

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meamemg t1_j6o89wz wrote

I'm not seeing the phrase "safe harbor" either in my post or OP's.

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Levertki1 t1_j6oaohd wrote

It’s not op but another irs link other person shared sorry I posted under you by mistake.

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Levertki1 t1_j6o2zlx wrote

I don’t think that is correct. I believe it is one of the 5 hardship withdrawal exceptions.

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nothlit t1_j6o3kby wrote

Hardship withdrawals are still subject to the 10% penalty unless some other exception applies

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

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Levertki1 t1_j6o3wz8 wrote

Principal residence is an exception. Correct?

Number 2 on last irs section you posted.

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nothlit t1_j6o4sxe wrote

I'm not seeing the phrase "principal residence" anywhere on that page.

If you look at the table under the row for "homebuyers" it clearly says "no" for qualified plans (401k, etc.) and "yes" for IRA.

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Levertki1 t1_j6o6hng wrote

Last one you posted before you changed it.

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Mega_Fry OP t1_j6onnqk wrote

Thanks for the info. Looks like I won't be able to claim anything. Makes filling this years taxes easier shrug

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