Is it legal to submit fake documents to qualify for a 401k withdrawal?

[smaguy]

Ok so just bear with me here, I know how this sounds but just hear me out.

Im not in a great place financially at the moment. Ive maxed out my 401k loans, bills are piling up, I can't ever seem to save anything. Theres always some expense or surprise bill or something.

So my question is: If I were to submit doctored paperwork for a 401k hardship withdrawal and follow all the rest of the rules, am I going to be risking any jail time or prosecution?

I would think not for 2 reasons: 1. Its technically my money, and 2. You could just as easily request the money for home purchase knowing you will back out the deal.

I would still pay all the taxes on it, the only real deception here is the reason for the withdrawal. Im not looking for judgement here, just an answer. I know many of you will disagree or say Im a terrible person, keep those things to yourself please and thanks.

 

[eerelations]

This is called "fraud".

 

[cbg]

No one here is going to encourage you to violate Federal regulations.

 

[Taxing Matters]

So my question is: If I were to submit doctored paperwork for a 401k hardship withdrawal and follow all the rest of the rules, am I going to be risking any jail time or prosecution?

Potentially, yes. What you are doing is fraud. If the plan does not allow you to make withdrawals except for hardship and you fraudulently claim the hardship, that's a problem. And it's compounded by the fact that if it is not a hardship withdrawal and you are under age 59½ not only must you include the withdrawal in income, but you must pay the 10% early withdrawal tax (what is commonly called the early withdrawal penalty). You'd need to pay that penalty, too, or you also commit tax evasion or tax fraud. If you pay the penalty you reveal that you didn't qualify for the hardship withdrawal.

Making an early withdrawal and having to pay the penalty on top of the income tax is really a poor financial outcome and should be avoided if at all possible. If you are having trouble saving and are always finding yourself in financial difficulty then the § 401(k) withdrawal probably isn't going to be much more than a temporary fix anyway unless you deal with the underlying financial problems. It would be a shame to blow your retirement money only to find yourself back in the same position a few months down the road. Have you tried maybe getting advice from a financial planner or credit counselor? It might help you make adjustments so that you are able to save and deal with the debts you have (just make sure you pick a good advisor if you decide to get that help).