The CARES Act waives the otherwise mandatory 20% withholding on a rollover-eligible distribution, so you can generally specify whatever amount of withholding makes sense for your particular tax situation, even as little as $0 if doing so would not result in a tax underpayment penalty. However, the qualified retirement plan is not required to allow less than 20% withholding as permitted by the CARES Act, so check with the plan.
While not subject to any 10% early-distribution penalty, a Coronavirus-Related Distribution to a qualified individual is subject to ordinary income tax at the individual's marginal tax rate, taking into account all of the individual's income and deductions. The amount of a CRD that will be taxable on your 2020 tax return will depend on whether you chooses to include the entire amount in 2020 or to include it in equal parts in 2020, 2021 and 2022. It also depends on if and when you repay any amounts of the distribution. Taxes withheld from the distribution will be credited on your 2020 tax return, with the amount in excess of the your 2020 tax liability either being refunded or applied to 2021 as you indicate on your 2020 tax return.
