BLOG

2023, Blog

COVID-era 401(k) or IRA Withdrawal Repayment

Here is a friendly reminder of the 3-year repayment rule on COVID 401(k) or IRA withdrawals.  In 2020, the CARES Act allowed taxpayers to withdraw up to $100,000 in coronavirus-related distributions from their 401(k) Plan or IRA accounts.  Many taxpayers withdrew these funds in the 2020 Tax Year, and the end of the three-year repayment window is fast approaching.

When taxpayers took out a COVID-related distribution in 2020, the 10% early withdrawal penalty did not apply, plus there was an option to split the tax on this distribution over three tax years (2020, 2021, and 2022).

Have you paid taxes on this COVID distribution in 2020, 2021, and 2022, and now you find yourself in a situation where you could repay all or a portion of the COVID distribution?  In that case, you have three years from the date of the original distribution to put the funds back into an eligible retirement plan as a qualified rollover.  Doing this may allow you to file amended returns for 2020, 2021, and 2022 for a refund of the tax paid during those years.

The following article from CNBC gives some basic rules about this repayment rule.

We suggest talking with your tax advisor about the intricacies of this repayment rule to determine if you would be eligible for refunds in all three tax years if repaid by the 3rd anniversary of the original COVID distribution.

READ MORE



By browsing this website, you agree to our privacy policy.
I Agree