I may have to take a withdrawal from my 401(k), as a result of the current situation. We're home quarantined, unexpected expenses, etc. I called my plan administrator, and I was told that I don't need to submit any documentation, but that I should keep documentation, in the event the IRS conducts an audit. That word 'audit' always scares me, so what documentation would I need to retain?
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Keep track of any records you have from employers or physicians or other information that supports the proof that you were quarantined and for the length of time that you experienced the quarantine.
If your quarantine was a result of a government order, there will be records of this but you may want to make a note of the date the quarantine began and when it ended and keep records related to your loss of income could be helpful. Those records might include your pay records for the prior year, your notifications of furlough or unemployment claims, etc.
You may also want to keep a record of any additional expenses that you had as a result of the quarantine. For example, if you had to pay additional expenses in order to provide education to children at home (internet service, additional electric expense, additional grocery expense, etc.).
Also, if you become ill and have additional medical expense keep those records as well.
A folder with printouts of these records is ideal but you can also maintain the records electronically. If you maintain them electronically, be sure to keep a backup of your records in a secure location as well.
Also, as an aside don't let "audit" scare you too much - these are still quite rare and most of the time they only require that you mail in some documentation. They're not quite as scary as they seem, I promise!
As a TurboTax customer you can also always purchase our added TurboTax Audit Defense product which provides representation in case you are audited, or you can call us for our free Audit Support. We are available throughout the year to provide you with basic guidance regarding how to respond to any correspondence that you receive from the IRS.
Audits sound scary, but most of the time as long as you keep good records they aren't nearly as bad as they sound!
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