Distributions from his 401K would count as income and he would receive a 1099 to file and report.
What doesn't make sense to me is that if he's as poor as he claims, he may actually qualify for a lot of assistance in the form of earned income tax credit, food stamps, section 8 housing eligibility, etc.
I'm not qualified to judge his past behavior or what not but by looking at his bank statement, he doesn't seem to be spending his money wisely. I live a few blocks from him so I recognize those places. Rotten Robbies is a gas station which usually means overpriced groceries and sundries.
If he has the ability to work, he could invest the rest of his money into renting a car and then driving for Uber or Lyft. Uber is guaranteeing $40+ per hour for 6 months which is a hell of a lot more than you make as a dishwasher. The only consideration is if he can keep a 4.9+ rating out of 5.0 which seems like a stretch from someone who may be having problems.