401K taxes

[M3489]

I'm 64yrs old and closed my 401K after my job was eliminated. Can I spread the taxes out over three years?

[SweetieJean]

Possibly.  The form for handling that, though, won't be ready on TT until Feb 25 or 26, so come back then.

Is there a reason you didn't roll it over to an IRA?

[M3489]

With all the lock downs because of Covid-19, I thought it best to payoff my debts because the job market was and still is very tight.  My position was eliminated after new ownership and not caused by Covid-19.

[ColeenD3]

In order to qualify for the special treatment, you must have met the following conditions:

Those who qualify as individuals directly impacted by the pandemic will be able to withdraw up to $100k from their retirement accounts without facing the 10% early withdrawal penalty.

You qualify if:

• You, your spouse, or your dependent are diagnosed with COVID-19
• You experience adverse financial consequences as a result of being quarantined, furloughed, or laid off
• You had work hours reduced to COVID-19
• You’re unable to work due to child care closure or hour reduction

The distribution would be taxed over 2020, 2021, and 2022. You’ll have that time to pay back the funds you withdrew, without the amount impacting that year’s cap on contributions, and if you pay back the amount within that time, you’ll be able to claim a refund on those taxes.