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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121150  
Subject: Re: 401k withdrawal Date: 9/2/2011 8:41 PM
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In the 2009 tax year we had big medical bills as my wife had a heart attack and had to have stents inserted. I took an early 401k distribution to pay the medical bills. A few weeks ago I got a CP2000 notice requesting payment of a 10% tax penalty, although I'm pretty sure this particular distribution was exempt since it was used to pay medical debts. Should I challenge the notice? If so, what evidence should I send?

You should pay the penalty. Early distributions from IRAs can avoid the 10% excise tax if they meet certain conditions (medical expenses in excess of 7.5% of AGI is one), but the exemptions do not apply to early distributions from 401(k) accounts.

Ira
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