I went through a hardship withdrawal two years ago when my husband was out of work for seven months. Here's what I wish someone had told me beforehand: First, make absolutely sure you've exhausted other options. I should have looked into my company's employee assistance program - they offered emergency loans with much better terms than I realized. Also check if your state has any hardship programs or if you qualify for unemployment benefits if you haven't already. Second, the process took longer than expected. From application to getting the money was about 3 weeks for me, so don't count on this being a quick fix if you're facing immediate deadlines like foreclosure. The tax hit was brutal - I withdrew $12,000 and only netted about $8,400 after taxes and penalties. But honestly, it kept us in our house and gave us breathing room to get back on our feet. Sometimes you have to make the best of a bad situation. One thing that helped was immediately increasing my 401k contribution percentage once we recovered financially. I bumped it up by 2% to try to make up for some of the lost time. It's not perfect, but it's better than nothing. Don't let people shame you for considering this - these accounts exist for emergencies, and it sounds like you're in a legitimate one. Just make sure you're making an informed decision with all the facts.

I've been following this thread and wanted to add something that hasn't been mentioned yet - the psychological aspect of taking a hardship withdrawal. When I had to do one three years ago during my divorce, I felt like I was "stealing from my future self" and it created a lot of guilt and anxiety. What helped me was reframing it: this wasn't a failure, it was using a tool that exists for exactly these situations. Your 401k is part of your overall financial safety net, and sometimes you need to use that safety net to prevent a much worse outcome. Also, consider the alternative costs. If you don't take the withdrawal and end up missing mortgage payments, defaulting on loans, or going into high-interest debt, those consequences could be far worse than the taxes and penalties. I ran the numbers on what would happen if I let things spiral versus taking the withdrawal, and the withdrawal was clearly the better choice. One practical tip: if you do move forward, consider having extra taxes withheld from the distribution beyond the mandatory 20%. I had them withhold 30% total to avoid owing money at tax time. It meant less cash upfront, but no nasty surprises in April. You're dealing with a tough situation, but you're being smart by researching thoroughly before deciding. That alone tells me you'll make the right choice for your family's circumstances.

I think there's also an important practical consideration that hasn't been fully explored yet - the administrative and compliance costs of different tax systems. While flat taxes seem simpler in theory, the reality is that even with a flat rate, you still need to define what constitutes "income" - do you include capital gains, inheritance, investment returns, business expenses, etc.? These definitional questions create complexity regardless of the rate structure. Progressive systems, despite having multiple brackets, often capture these nuances better and can be designed to close loopholes that disproportionately benefit high earners. Many countries with flat taxes have found they need to add back complexity over time to prevent tax avoidance. From a revenue perspective, progressive taxation also tends to be more stable during economic downturns since it relies more heavily on higher incomes that are less volatile than lower incomes during recessions. That said, I really appreciate how this discussion has highlighted that "fairness" isn't just a mathematical concept - it involves real judgments about economic impact, social values, and practical outcomes. Both systems have legitimate philosophical foundations.

I think one aspect that deserves more attention in this discussion is how progressive taxation can actually enhance economic mobility and opportunity - something that benefits society as a whole. When lower-income individuals keep more of their earnings through lower tax rates, they're more likely to invest in education, start small businesses, or take entrepreneurial risks. This creates a more dynamic economy where talent can rise regardless of starting point. Meanwhile, those at higher income levels often have wealth that generates returns through investments, real estate, and business ownership - income sources that are less dependent on their immediate tax burden. The progressive structure recognizes that a wealthy person's ability to generate future income is less affected by current taxation than someone living paycheck to paycheck. There's also the network effects to consider. Higher earners typically benefit more from stable, educated communities - their businesses need skilled workers, reliable infrastructure, and consumer spending power. Progressive taxation helps maintain these conditions by ensuring public investment in education, infrastructure, and social stability. So while I understand the intuitive appeal of "same percentage = fair," I've come to see progressive taxation as an investment in the economic ecosystem that ultimately benefits everyone, including high earners.

Just wanted to share my experience as someone who recently went through this exact situation. I had overdue returns for 2019 and 2020, and like you, I was confused about the IP PIN requirement on PriorTax. After reading through all the helpful advice in this thread, I ended up calling the IRS IP PIN line at 1-800-908-4490 (thanks Hunter Hampton for that number!). Surprisingly, I got through in about 20 minutes and confirmed I didn't have an IP PIN. The agent explained that the confusion often comes from tax software asking about the most recent year's PIN even when filing older returns. I ultimately decided to try a different service after reading about the hidden fees issue with PriorTax. Used FreeTaxUSA for my 2019 return and one of the AI-powered services mentioned here for 2020. Both were much more transparent about their pricing upfront, and neither had confusing IP PIN questions. My advice: definitely verify your IP PIN status first using either the IRS website or phone line, then shop around a bit before committing to any service. The peace of mind of knowing exactly what you'll pay is worth the extra research time.

I've been following this thread closely since I'm dealing with a similar situation - overdue 2021 return that I keep putting off. The IP PIN confusion seems to be a common issue across multiple tax services, not just PriorTax. What I found really helpful from reading everyone's experiences is that there are essentially three steps to handle this properly: 1) Verify your IP PIN status through the IRS (either online or that direct phone line), 2) Compare the actual total costs of different services upfront, and 3) Make sure whatever service you choose clearly explains their process for prior year returns. The hidden fees issue is particularly concerning since we're already dealing with potential penalties for late filing. The last thing anyone needs is surprise charges on top of everything else. Has anyone here actually calculated the total cost difference between these various services when you factor in all fees? I'm curious if the premium services like the AI-powered ones end up being cost-effective when you consider the time savings and reduced confusion.

11 Has anyone noticed that the IRS systems seem worse this year than ever before? I've had multiple issues with payments not being properly credited, and I know several people who've had similar problems. I made a payment in February and it took until May for it to show up in my account!

I've been through this exact situation! The most likely scenario is that your payment was received but hasn't been fully processed yet. The IRS systems can be incredibly slow, especially during busy periods. Here's what I'd recommend: First, make sure you have all your documentation ready - your Direct Pay confirmation number, bank statement showing the payment cleared, and the notice you received. When you call the IRS (and yes, you'll probably need to call), they can use your confirmation number to trace exactly where your payment went. The interest charges from 4/15/2024 to 7/15/2024 suggest this might be related to a prior tax year balance, not your recent payment. Double-check your Direct Pay confirmation to make sure you applied the payment to the correct tax year and tax type. Also, try accessing your IRS online account at different times of day - their systems are often overloaded during peak hours but work better early morning or late evening. If you can get in, you should be able to see a payment history that shows where your $5,200 went. Don't panic - this is fixable, just requires some patience and persistence with the IRS phone system!

Just went through this same confusion last month! Code 806 is definitely the amount withheld from your paychecks throughout the year - it's money you already paid to the IRS. When you add it to your bottom line refund amount and it equals what you expect, that's actually a good sign! It means your withholdings are covering your tax liability properly. The 806 amount gets applied as a credit against what you owe, and whatever's left over becomes your refund (which will show up as code 846 when it's processed). So you're not getting the 806 amount ON TOP of your refund - it's already factored into the calculation. Hope that clears things up!

The 806 code can definitely be confusing at first! To put it simply - code 806 shows the total federal income tax that was withheld from your paychecks throughout the year. This is money you've already paid to the IRS, so it acts as a credit on your account. When you're calculating your refund, the IRS takes all your credits (including that 806 withholding amount) and subtracts your actual tax liability. Whatever's left over becomes your refund. So if adding the 806 amount to your expected refund gives you the total you think you should get, that suggests your math is on track! Just remember to look for code 846 on your transcript - that's when your actual refund gets sent out. The 806 is just showing the IRS recognizes the payments you already made through payroll deductions.