Get your taxes done using TurboTax

It depends.  First of all,  you were able to eliminate high interest debt.  Second of all, due to the CARES Act, you were able to withdraw from her 401(k) and avoid a 10% early withdrawal penalty.  You also have the option of spreading the amount of the distribution across 3 years, so you can reduce the tax burden this year.  You also have the option of recontributing some or all. the funds by the end of the third year and amending your returns..