The 401(k) plan administrator must honor your certification that you qualify (paragraph B below) under paragraphs i, ii, and or III. The administrator will code the resulting 1099-R for the distribution accordingly.
(A) CORONAVIRUS-RELATED DISTRIBUTION.—Except as provided in paragraph (2), the term “coronavirus-related distribution” means any distribution from an eligible retirement plan made—
(i) on or after January 1, 2020, and before December 31, 2020,
(I) who is diagnosed with the virus SARS–CoV–2 or with coronavirus disease 2019 (COVID–19) by a test approved by the Centers for Disease Control and Prevention,
(II) whose spouse or dependent (as defined in section 152 of the Internal Revenue Code of 1986) is diagnosed with such virus or disease by such a test, or
(III) who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury (or the Secretary's delegate).
(B) EMPLOYEE CERTIFICATION.—The administrator of an eligible retirement plan may rely on an employee’s certification that the employee satisfies the conditions of subparagraph (A)(ii) in determining whether any distribution is a coronavirus-related distribution.
You will request your withdrawal normally, and it will be penalty-free (if you are aged less than 59 1/2) when you file your 2020 tax return.
@MinhT1 wrote:
You will request your withdrawal normally, and it will be penalty-free (if you are aged less than 59 1/2) when you file your 2020 tax return.
You don't quite take a normal distribution. You must tell the plan administrator that it is a qualified Corona virus related distribution for the plan administrator to code the 1099-R to show that there is no early distribution penalty. A normal distribution will impose a 10% penalty if under age 59 1/2.
Can you please provide the IRS or other reference for more details about penalty free 401k withdrawal related to the CARES act?
thanks!
Bud
@budlavin11 wrote:
Can you please provide the IRS or other reference for more details about penalty free 401k withdrawal related to the CARES act?
thanks!
Bud
Go to this IRS website for Coronavirus-related relief for retirement plans and IRAs questions and answers - https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-answers