There's no such thing as a Zero withdrawal. For tax purposes, the amount of your withdrawal is still considered taxable income. Depending on the circumstances for the withdrawal, will determine how that withdrawal is taxed. Example, if it was a Covid Withdrawal, then at minimum, you may be entitled to a waiver of the Early Withdrawal penalty. Regardless of the penalty, 100% of a Covid distribution is taxable income. Your options would then be either pay taxes on 100% of the withdrawal in 2020 or you can spread out the distribution amount into 1/3 over the next three years so you'll not hit by all that income tax at once. OR you can get out of paying income tax all together on the entire distribution amount by repaying 100% of the distribution back into your retirement account over the next three years.
