Hello, how are you all doing ? Summer is flying on by (I think so anyway).
Hopefully you are aware that if you withdraw funds from your retirement account, you will have to pay an extra 10% tax "penalty" on the withdrawn amount. This is over and above the normal income tax on it. There are a bunch of exceptions that have existed, that are pretty hard to meet.
Starting 2024, there are a couple of new exceptions. One in particular seems pretty generic, namely, if you withdraw for "emergency personal expense". Does this really mean you can withdraw for any reason? Here is the official description:
“emergency personal expense distribution” means any distribution made from an applicable eligible retirement plan to an individual for purposes of meeting unforeseeable or immediate financial needs relating to necessary personal or family emergency expenses
As you can imagine, this definition lends itself to a claim that can include almost anything. By the way, only a maximum of $1,000 can be taken, so I'm not sure why the IRS would be overly concerned about a claimed withdrawal meeting the definition. We're only talking about a $100 savings here. But whoever said the IRS is logical !
Recently, the IRS issued guidance on this provision, called Notice 2024-55. If you want to make this $1,000 withdrawal, I suggest you read the Notice to ensure it fits. The Notice is 26 pages long, so you may decide withdrawing the $1,000 is not worth the trouble. But just in case I've attached it here
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