My 401K provider wouldn't allow or approve COVID withdrawls, and the hardship withdrawl was similar. I did pull (withdraw) money out and used most of it for medical bills, but not all of it (not good, I know). However, since they would not approve COVID withdrawls, I was unfortunately issued a 1099-R with a distribution code 1.
I got hit with the 20% withdrawl penalty at the time of withdrawl which I accepted. Now the 10% early withdrawl penalty is being assessed on my taxes and consequently, we are facing a large tax bill (large for us).
However, can I spread the 10% penalty tax amount out over three (3) years? How do I do this? My 401K provider was no help. I am not objecting to paying the penalty. However, I do want to spread it out as much as possible. I don't want to have an IRS debt, but don't want to be in a massive payment plan, so spreading out the penalty would work for us. How do I do this?
Online research has been futile. And I can't find anything in the TurboTax literature.
