You owe the tax, no one gets out from under the 10% penalty and income tax due. Taking a substantial amount out in any one year can bring you up into a higher tax bracket, which is why looting your 401k to pay bills isn't always the best idea.

The IRS will allow you to set up a payment arrangement for the taxes you owe, but other than that, no, there is no relief from federal tax debt. Bankruptcy won't help, and there is no statute of limitations for collecting it.

Unfortunately as IMHO said, there isn't much you can do at this point. The best thing to do with a 401k if you need extra money, is to take a loan from the 401k - that way there are no tax implications - and you in fact are paying interest on the loan to your own 401k.

If perhaps some of your hardships were medical bills, then you might be able to get some relief. Review the instructions for Form 5329, see if any of the exceptions apply to you.

General hardship is not an exception to the penalty.

Yep, if you were paying cobra or out of pocket medical bills you can claim them and relieve or reduce the 10% but the tax is still the same, and you should have had them withhold the tax ahead of time, or taken a loan out that you would have repaid to the fund...that way, you dont pay anything...sorry for your situation--we were out of work for 2 years, so we know exactly what you are going through. Hopefully they will make some changes in the tax law...

I took a loan from my 401k for 5yrs. now my county job is going to be eliminated. can I request to chage my loan to a withdrawal before I lose my job and make payment with the IRS?

No, unfortunately, the taxes are all owed. All withdrawals from 401(k)s are considered income, which will inevitably raise what you owe in income tax. If it's an early withdrawal, then you're probably subject to the 10% penalty, which hikes up your tax bill even more. You might also owe state taxes, since these aren't always withheld at the time of withdrawing money.

At this point, there isn't much you can do to avoid the tax. Try to pour over your taxes when it comes time to file. Look at every credit and write off possible. It may be better to itemize, rather than using the standard deduction. Chatting with a professional tax adviser could save you time and money as well.

In the future, be extremely mindful of further 401(k) withdrawals. Chances are that you've learned about the tax impact the hard way. If possible, use 401(k) money as a last resort to support your expenses.