CARES Act - returning the funds over 3 years

[wooderson73]

Hello,

I took an employer approved withdrawal from my 401k due to COVID 19 reasons. I believe one of the options is to return that money to the account over 3 years. After my withdrawal in June 2020, I continued to have a portion of my paycheck automatically distributed to my 401k. Does that constitute returning the money? For example, if I continued to have a % of my paycheck go back into my 401k, can that be counted as money returning for the CARES Act withdrawal?

Thanks

[MinhT1 · Accepted solution]

No. Money withheld from your paychecks is for new contributions to your 401(k) plan. These contributions are automatically excluded from taxation. They are NOT repayments of your COVID withdrawal.

The CARES Act allows the repayment of COVID distributions. This means actually repaying the money into your 401(k) plan. If you repay a coronavirus-related distribution, the distribution will be treated as though it were repaid in a direct trustee-to-trustee transfer so that you do not owe federal income tax on the distribution.

Please read this IRS document for more information.