"Previously, the IRS would be looking for source documents to substantiate a hardship withdrawal," she said. 23 memorandum to IRS agents, the agency changed its position on the documents needed to substantiate a hardship withdrawal, Wagner said. An employee providing a summary of the cause for withdrawal on the third-party record-keeper's website was not enough, she noted.īut in a Feb.
In 2015, the IRS issued a newsletter saying that employers should ask for and keep physical proof of the need for hardship withdrawals, such as medical bills. Agents did not think the self-certification electronic policy was enough, Clark said, and expected these third-party record-keepers or employers to have copies of the bills that gave rise to the hardship withdrawals.
But if those 401(k) plans were audited, IRS agents would ask the employers for proof that the withdrawals were due to hardships. In recent years, many institutions administering the records for 401(k) accounts have allowed employees to report on the account administrator's website that they have a hardship and need to make a withdrawal, without requiring them to submit documentation or bills to show why they need the money, noted Brenna Clark, an attorney with Eversheds Sutherland in Atlanta. 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.ĭue to uncertainties in how the IRS would handle audits, conservative employers may still choose to require employees to provide source documentation even before audits, said Marcia Wagner, an attorney with The Wagner Law Group in Boston. As of 2011, they also are waiving re-application fees for returning students from military leave.Employees no longer routinely have to provide their employers with documentation proving they need a hardship withdrawal from their 401(k) accounts, according to the Internal Revenue Service (IRS).
SAMPLE LETTER FOR HARDSHIP WITHDRAWAL FULL
If you withdraw before the seventh week of the university’s quarter, they are providing a full refund of all your tuition fees. Send in a copy of your military orders with the withdrawal application. The university is not accepting such a withdrawal reason. Never enlist in the military voluntarily. Active Military DutyĪt the University of Washington, a call to active military duty is an acceptable withdrawal reason. Examples include documents from an employer explaining your job changes or unemployment forms proving job loss. Submit documentation, as usual, proving your financial hardship. moving to another state or reducing hours) is another acceptable reason. Financial ReasonsĪ financial withdrawal usually means the loss of your supporting job or your head of household is facing financial issues. Examples include state death certificates or a medical business form from a hospital. Many colleges are requesting government forms as proof of family death or illness. Prove that it’s a hardship for you by submitting proper, notarized forms. This generally includes deaths in the family or family who are critically ill. Family emergencies fall under what most colleges say are personal withdrawals.