Do I have to pay extra tax even though I with drew money from my 401k due to Covid and reduced pay at work?

thurdle2001 · ‎March 17, 2021

I used a special Covid form to withdraw money from my 401k in 2020 since I had reduced pay at work and was worried about the Pandemic taking my job

AnnetteB6 · ‎March 17, 2021

You will not be subject to the 10% early distribution penalty if you meet the qualifications for your distribution to be due to Covid-19. However, meeting those qualifications does not make the distribution itself non-taxable. You will still owe income tax on the amount of the distribution. It can either be included in full on your 2020 tax return or you can choose to spread the distribution over three years to lessen the impact on your income or to allow you more time to pay the money back.

To learn more, take a look at the following TurboTax articles:

Can I waive the penalty for early retirement withdrawal if I'm impacted by Covid-19?

How are my taxes affected by the Coronavirus Pandemic?

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