COVID 19 Defer retirement account withdrawal interest

Yes.  When you enter your 1099R, you will be asked if this was due to a Covid related reason.  When you say yes, you will get the option to pay the tax over 3 years.

if I do defer for 3 years, do I pay interest on the amount I defer? 

You are not deferring payment for 3 years. You are spreading the amount taken over 3 years. Paying tax on 1/3 each year. There is no tax or penalty.

1. Return to the 1099-R, edit/update
2. Box 1 gross distribution
3. Box 2 taxable amount, enter the full amount
4. Box 7, code 1
5. taxes withheld
6. continue
7. About the Money... continue
8. Answer IRA, Safety Officer, continue
9. Select your state, continue
10. Where Is this Distribution from? Neither of the above, continue
11. What did you do? Something else, continue
12. Periodic payments? No, continue
13. Was this COVID? Yes, COVID, continue
14. How much? Enter all or portion, continue
15. Receive before Dec 30? Yes
16. Did you or dependents test positive? answer
17. Did you have reduction in income or other on the list? answer, continue
18. Did you repay any? answer, continue

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