Need an opinion. I've read the IRS guidance for Covid. Pretty much everyone in the US was effected, right? I have a client who took $60K from 401K, over 59 1/2 and still works. Her Covid reason is son lost job who lives with her, so increased costs, lost a higher paying job, and her bills increased. Is it safe to take that over 3 years.
I don't understand how loose or tight these covid rules are looked at by the IRS. Opinions, please.
This page on irs.gov does a good job of answering a lot of the issues around this.
The second item on the page deals with the specifics of who gets the relief.
No, not everyone was impacted. On this forum, we've seen where people are preparing a tax return for someone who did not go out of business, made more in 2020 than in prior years, did not get sick, and still took a distribution deciding to take advantage of the provision that didn't apply to them. Since the taxpayer can self-certify, though, there's not much to be done about that.
"Her Covid reason is son lost job who lives with her,"
Read Form 8915-E instructions:
"3.You experienced adverse financial consequences as a result of you, your spouse, or a member of your household (as defined next)"
"Member of your household. For purposes of determining whether you are a qualified individual, anyone who shares your principal residence is a member of your household."
"Level Up" is a gaming function, not a real life function.
It's certainly encouraging that these people have faith that the new Administration is not going to increase tax rates for them in the next two years. It was a clever maneuver by the last Administration to encourage withdrawals of funds that otherwise might not be taxed for decades.