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The 401k withdrawals are considered part of your adjusted gross income, even though it was a one-time thing. Thus, your stimulus payment was adjusted.
For additional information, please see the following articles on the IRS website:
A withdrawal from a 401(k) is always taxable income. There is also a 10% penalty for early withdrawal if you are under age 55 unless you qualify for an exemption. Any tax that was withheld is only an estimate, you get credit for that withholding but most people will owe more tax than was withheld.
If you can certify the withdrawal was due to a COVID-related hardship, you can be exempted from the 10% penalty, and you have the option of spreading out the income over three years instead of paying all the tax in one year. This part of the program is not ready yet and probably won't be until late in February, due to IRS delays. If you want to take advantage, delete your 1099-R forms and wait; re-enter them when the program is updated to cover this situation.
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