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I have a 53-year old client who withdrew $100K from his 401K and his 58-year old wife withdrew $50K from her 401K. The work hours were reduced and were told by their employer that they did not have to pay federal, state or 10% penalty since the withdrawal was related to Coronavirus.
My understanding is that the 10% penalty for early withdrawal is waived for Coronavirus disaster. However, federal and state taxes still apply. Is this not correct?
I'm completing the 1099-R Worksheet - section Qualified Disaster Distribution Smart Worksheet. Selected A: 2020 Coronavirus Related Distribution......and added the $100K for taxpayer and $50K for spouse under B: Amount of Qualified Distribution. After doing so, there was no federal tax or 10% penalty calculated.
Is this correct? I feel like I'm doing something wrong.
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