Early Distribution penaly waived for 2020 distributions?

[Theresastylist]

I have a client asking me if the penalty will be waived for early distributions of 401K withdrawals for 2020 because of the COVID hardship.  I can't find anything that supports this.  All help appreciated!

[BobKamman]

Hundreds of news stories about this, here's one:

https://www.usatoday.com/story/money/personalfinance/2020/04/05/coronavirus-retirement-savings-withd...

[Just-Lisa-Now-]

I'm really hoping that the financial institutions code these distributions with a Code 2 for withdrawals after the CARES act went into place...so we dont have to try and figure out when they took the money out.

[itonewbie]

My guess is that they will have a special code for coronavirus-related distribution because it's supposed to require certification from the individual.  The statutory language doesn't just say any distribution but attached various conditions (which are relatively easy to meet given the state of affairs).  There're also special treatments of such distributions for spreading the tax over 3 years (remember when ROTH was first introduced?) and option for repayment (to be treated just like a tax-free 60-day rollover).

[itonewbie]

If you want to know where to find it, it's in Sec. 2202(a)(1) of the CARES Act.