I withdrew $25K from my 401K for a down payment to purchase my first home. I was told due to COVID I would not be taxed on the entire amount this year but could spread out the withdrawal over a 3-year period. Any suggestions?

[macuser_22]

If a COVID related distribution then enter the 1099-R and say yes to the COVID questions and answer the remaining questions to pay the tax over 3 years.

[MaryK4]

To get the three- year income, you must have been a qualified individual affected by COVID-19. The distributions generally are included in income ratably over a three-year period, starting with the year in which you receive your distribution. For example, if you receive a $9,000 coronavirus-related distribution in 2020, you would report $3,000 in income on your federal income tax return for each of 2020, 2021, and 2022.

You are a qualified individual if –

• You are 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;

• Your spouse or dependent is diagnosed with SARS-CoV-2 or with COVID-19 by a test approved by the Centers for Disease Control and Prevention;

• You experience adverse financial consequences as a result of being quarantined, being furloughed or laid off, or having work hours reduced due to SARS-CoV-2 or COVID-19;

• You experience adverse financial consequences as a result of being unable to work due to lack of child care due to SARS-CoV-2 or COVID-19; or

• You experience adverse financial consequences as a result of closing or reducing hours of a business that you own or operate due to SARS-CoV-2 or COVID-19.