@Bsch4477 wrote:
The article cited below suggests that the penalty free distribution applies to withdrawals before June 25, 2021 but I can’t confirm that on any IRS site. Just having a positive Covid test qualifies you.
https://holtzmanpartners.com/2021/08/04/thinking-about-a-cares-act-401k-withdrawal-heres-what-you-ne...
I don't think this is correct. I found the section and I now remember discussing this with the group previously.
The Consolidation bill extends the special tax treatment given to COVID distributions to any other disaster that might have been declared between Jan 1, 2020 and 60 days after the bill was enacted. It specifically excludes from the definition of "disaster", anything having to do with COVID if COVID is the only reason a disaster was declared.
Division EE of the consolidated appropriations act, Title III, section 301, page 1889 of this pdf.
PDF (5MB)
I do not believe the taxpayer here is entitled to any relief on the 10% penalty for early withdrawals. In any case, since these are 2021 withdrawals, they will be reported on next year's tax return, and I suppose the law might change before then.
Even if the law blog is correct, it only applies to withdrawals made before June 25, and not to withdrawals after that date, even if the taxpayer retired before that date.
