This person was laid off the job in Jan 2020 but did received a severance package. The taxpayer (age 32) was unable to find employment due to Covid 19. This person started unemployment in 2020 and is still unemployed. The taxpayer withdrew $15,000 from their 401K and withheld $1500. Still on Schedule 2 there is "other taxes" equaling $1500. I believe that to be the penalty. How do I clear that in light of the penalty forgiveness in 2020.
"Still on Schedule 2 there is "other taxes" equaling $1500. I believe that to be the penalty."
But it's not the penalty; it's the required withholding. Your tax or penalty isn't necessarily determinable at the time you ask for a distribution, and there might be an exception such as covid disaster distributions in 2020. The penalty is determined on the tax filing.
"How do I clear that in light of the penalty forgiveness in 2020."
That's a different issue.
You won't "clear" a withholding. It's already paid in.
You would need to confirm your client's distribution qualifies for the waiver of the penalty, which might be the coronavirus disaster or a job loss condition. You need to read what applies and use the program to accomplish what applies.
"Level Up" is a gaming function, not a real life function.