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I have a 401(k) with over 100 k in it .

My question is if my former employer's 401(k) plan does not withhold the 10 % early withdrawal penalty, will I need to pay this with a US tax return ? after or is there any way the IRS will ask for payment ?

Details:
The US employer ''Separation of employment'' - termination due to oilfield slowdown

  • Can I claim ''hardship'' terms to avoid the 10% penalty ?
  • They will with-hold 15 % of the total with Canada tax treaty claim (not the standard 30 % )
  • Canadian citizen - non -resident of the USA.
  • Age 48
  • No other USA income, other than a US stock brokerage account - as non resident.
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    You will be required to file a US tax return regardless. Withholding is just an approximation. You always need to file a return to calculate the exact amount, and will get a refund if you've paid too much, and need to pay more if you haven't paid enough.
    – user102008
    Mar 9, 2016 at 2:16

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The 10% early withdrawal penalty is just that a penalty, not a withholding. Your employer isn't responsible for dealing with it, it'll be assessed when you file your US taxes.

To your other question - it sucks for someone in that situation, but hardship is not one of the limited exceptions to the 10% penalty.

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