401k Distribution

Forum|Forum|5 years ago
April 8, 2021
1 reply
6 views

My wife took a full distribtution from her 401k from a previous employer to pay off some credit cards. She is 57. Is there any way to reduce the tax bill?

JeffreyR77

Level 10

It depends. First of all, you were able to eliminate high interest debt. Second of all, due to the CARES Act, you were able to withdraw from her 401(k) and avoid a 10% early withdrawal penalty. You also have the option of spreading the amount of the distribution across 3 years, so you can reduce the tax burden this year. You also have the option of recontributing some or all. the funds by the end of the third year and amending your returns..

valleyhuffs353Author

Level 2

I didn't see anything in TurboTax related to the Cares Act. How do I claim that?

macuser_22

Alumni - Champ

When you enter the 1099-R it will ask if it was COVID related.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**