3rd stimulus

mccallumfam06 — Tue, 16 Mar 2021 18:34:14 GMT

Unfortunately I had to cash out my 401k to cover the loss of our job. I would like to know, if cashing out counts towards your AGI??

And if so, we do not qualify for the 3rd stimulus?? That's unfortunate since I had to cash out in order to stay afloat and now we get punished by not getting the stimulus??

Re: 3rd stimulus

ErnieS0 — Tue, 16 Mar 2021 18:55:21 GMT

Yes. A distribution for a 401(k) plan does count towards your AGI. You are able to spread out coronavirus-related distributions over three years reduce your 2020 AGI. One third will be added in 2021 and one third will be added in 2020 so that may impact your third stimulus payment, among other things.

Generally, if you are a U.S. citizen or U.S. resident alien, you are eligible for the full amount of the third Economic Impact Payment if you (and your spouse if filing a joint return) are not a dependent of another taxpayer and have a valid Social Security number (see exception when married filing jointly) and your adjusted gross income (AGI) on their tax return does not exceed:

$150,000 if married and filing a joint return or if filing as a qualifying widow or widower
$112,500 if filing as head of household or
$75,000 for eligible individuals using any other filing statuses, such as single filers and married people filing separate returns.

Payments will be phased out – or reduced -- above those AGI amounts. This means taxpayers will not receive a third payment if their AGI exceeds:

$160,000 if married and filing a joint return or if filing as a qualifying widow or widower
$120,000 if filing as head of household or
$80,000 for eligible individuals using other filing statuses, such as single filers and married people filing separate returns.

Related Resource:

Coronavirus-related relief for retirement plans and IRAs questions and answers

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3rd stimulus

Re: 3rd stimulus