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userbrian-
New Member

Isn't taking funds from your 401k because you lost your job due to the covid19 pandemic a reason that qualifies for temporary relief without penalty from the CARES act?

I was terminated due to the removal of my position at work due to covid19. With no job and fear of no income I took an early withdraw of funds from my 401k being told at the time from my HR dept. that I qualified for the CARES act temporary relief without penalty over the 10% tax that I paid at the time. How do I get the relief from the 10% early withdrawal I was told I qualified for?
3 Replies
DawnC
Expert Alumni

Isn't taking funds from your 401k because you lost your job due to the covid19 pandemic a reason that qualifies for temporary relief without penalty from the CARES act?

Yes, you qualify to waive the penalty and spread the ordinary income tax over 3 years, but the forms are not ready yet.   If you took a distribution from a retirement account due to corona virus related issues, you will be able to waive the penalty and spread the ordinary tax over tax years 2020-2022.  However, the forms have not been finalized by the IRS yet, so TurboTax has not been updated.  Once the forms are final (no date determined by IRS yet), you will see the options to apply the tax relief provisions on Form 8915-E.   The IRS does not start accepting returns until Feb 12th, so check back then to see what the status is.  

 

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 because of being quarantined, furloughed, or laid off
  • You had work hours reduced to COVID-19
  • You’re unable to work due to childcare 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.

 

As things change, TurboTax is continually updated and able to handle every situation that arises to ensure your taxes are done right, so you’ll receive your maximum refund.

 

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LAndres101
New Member

Isn't taking funds from your 401k because you lost your job due to the covid19 pandemic a reason that qualifies for temporary relief without penalty from the CARES act?

Are these forms ready now 2/17/21?  If not, do you know when they will be?

DoninGA
Level 15

Isn't taking funds from your 401k because you lost your job due to the covid19 pandemic a reason that qualifies for temporary relief without penalty from the CARES act?


@LAndres101 wrote:

Are these forms ready now 2/17/21?  If not, do you know when they will be?


The Form 8915-E is scheduled to be available in TurboTax on 02/24/2021

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