Most distributions from qualified retirement plans made to you before you reach the age of 59.5 are subject to an additional tax of 10%. The IRS may waive this tax under certain circumstances; however, there is no broad definition of "hardship" for the purposes of exemption from the 10% penalty.
You may be exempt from the 10% tax if the hardship you're facing is included in the IRS's list of exceptions - for example, if you are withdrawing for certain deductible medical expenses or if the distributions are going to an alternate payee under a qualified domestic relations order. The list of exceptions can be found in IRS publication 575 (page 28) at http://www.irs.gov/pub/irs-pdf/p575.pdf. If you are unable to view a PDF document, the HTML version is at http://www.irs.gov/publications/p575/ar02.html#d0e3742.
To claim the early-distribution penalty exception, you may be required to file additional forms with the IRS along with your income tax return. Be sure to consult with your tax professional to ensure the appropriate forms are filed.
(For more on this topic, read the article Taking Penalty-Free Withdrawals from Your IRA.)
This question was answered by Denise Appleby