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Early 401k withdrawal penalty forgiveness due to Covid 19 in 2020

COSkiBum
Level 2

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.

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jclark11
Level 2

form 8915E. on the 1099 go down and see the Qualified disaster distribution worksheet  in A hit 2020 coronavirus distribution and then in B check entire distribution is qualified

qbteachmt
Level 15

"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.

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