How to Get Approved for a Hardship Withdrawal
- 1). Review the IRS-eligible hardship exceptions. Using retirement funds for unreimbursed medical expenses that are more than 7.5 percent of your annual income is one exception. Distributions paid to a disabled person also qualify as a hardship. Using retirement funds to prevent foreclosure or eviction is another hardship distribution. You can also use retirement funds to pay medical insurance premiums if you have lost your job.
- 2). Keep all receipts related to the hardship expense. Retirement plan administrators rarely request documentation, but the IRS may conduct an audit and you would have to produce your proof of hardship eligibility.
- 3). Complete all forms required by your retirement plan custodian for an early distribution. Indicate the hardship on the form. If there is no box to check, write "hardship" next to the distribution amount. Your hardship exception will only be valid for amounts equal to or less than the receipts you have.
- 4). File a Form 5329 with your personal tax returns. Form 5329 records early distributions, notes the hardship claimed and calculates any penalties for taking out funds not exempt.
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