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  1. #1
    bobby24mar is offline Junior Member
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    Aug 2010
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    401k hardship withdrawal for home purchase

    What is the name of your state (only U.S. law)? Pennsylvania

    I am trying to withdraw funds from my 401k through my employer for a home purchase. I requested and received a hardship withdraw form from the company, dated 7/22/2010. I had the option of submitting a purchase contract OR Good Faith Estimate OR builders contract as proof of qualifying for the penalty-free early withdraw. I chose to submit the good faith estimate, since only 2 pages. All criteria required on the good faith estimate were met without question. I submitted forms, and when I called back today to check its status, I was told it was denied because the good faith estimate can no longer be accepted as a standalone document. I was told that as of 7/1/2010, the IRS now requires a good faith estimate AND the purchase contract, despite what it says on the hardship withdrawal form, dated 7/22/2010, which reads either one "OR" the other. Not both. Now you might say, well just send them the purchase contract too... and I would but the problem is the purchase contract is 6 weeks old. They only accept documentation within the past 30 days. And you can't exactly get a purchase contract re-signed and re-dated. It is a legally binding contract between buyer and seller and witnesses, and those changes aren't legally possible.

    So since I only have a GFE that is dated in last 30 days, that's all I have that they will accept. So I did some extensive research on the IRS tax law changes and for any requirement changes with regard to 401k hardship withdrawals. I have found nothing. Zip. The company holding my 401k insists it is an IRS law change governing required documents of 401k withdrawal. Could it just be the company has made requirement changes on their own (in which case they should honor the documentation they sent me as good enough - since the form is dated AFTER they apparently made the requirement changes) or is there actually an IRS tax law change that now requires more than just the GFE as a standalone document?

    If you can, in response, cite the IRS form that addresses this if it is in fact correct.
  2. #2
    davew128 is offline Senior Member
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    Quote Originally Posted by bobby24mar View Post
    Could it just be the company has made requirement changes on their own (in which case they should honor the documentation they sent me as good enough - since the form is dated AFTER they apparently made the requirement changes) or is there actually an IRS tax law change that now requires more than just the GFE as a standalone document?
    No idea what you're talking about. The IRS doesn't care about your documentation for a 401(k) hardship withdrawal. Nor do I know why you think your withdrawal would be penalty free. There is no exception to penalty from a 401(k) early distribution for first time homebuyers.

    If you can, in response, cite the IRS form that addresses this if it is in fact correct.
    I charge for citations.
  3. #3
    bobby24mar is offline Junior Member
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    This is what I was told while making numerous calls following up on the status of my hardship withdrawal request. They told me it was denied because Federal Law (IRS and HUD) now requires more than just the GFE as a standalone document. After going back and forth with them, I told them they should honor what it states on the documentation that was sent to me in the mail (the hardship withdrawal form) and the criteria outlined on that document to withdrawal the money. On the form it is clearly written:

    Provide one of the following as proof of purchase of your principle residence:
    -Purchase Contract of home being purchased OR
    -Good Faith Estimate of home being purchased OR
    -Builders Contract for a new home OR
    -Letter of Intent to Purchase

    So I sent the GFE. Well apparently mid-process, the rules changed, and now GFE isn't acceptable as a standalone document. When I asked them to honor the documentation sent to me, their response was "we can not make an exception in this case, to do so we would be breaking Federal Law and non-compliant with the current IRS requirements for 401k hardship Withdrawal."

    But you and a real estate attorney I spoke to both have told me the same thing... there is no such requirement. Do you think at this point that they are just giving me the runaround because they don't want me to take the money out? And are just making rules up as they go? It appears that the company itself changed the provisions of the hardship withdrawal on its own, and when asked for a new form with updated criteria I was told "we are currently working on an updated version with the new requirements and it is expected near the end of August" Hello?!! So how can you hold me to the new rule changes if you can't even provide the correct up to date documentation?

    I
  4. #4
    davew128 is offline Senior Member
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    Well asking a real estate attorney for advice on anything other than....well real estate is usually foolish.

    Look, this isn't a tax issue. Whatever the reason for the hardship withdrawal, the IRS doesn't care. They don't get any paperwork other than the 1099-R at the end of the year. \

    This is a plan issue, nothing more.

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