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I have a client that took out a Coronavirus Distribution in 2020 for $75,000 from his 401k from his employer at the time. He elected to have it taxed over 3 years. For tax year 2022, he now has a new employer and he said he repaid $25,010 from his salary to repay part of the Coronavirus distribution, but the $25,010 shows up in box 12 with a "D" code (Elective deferrals to 401(k) plan). I'm not sure this is correct. I thought he had to repay with post tax dollars. This seems to be just a regular pre-tax 401k deferral for tax year 2022... instead of an actual coronavirus distribution repayment. Can you repay a with a 401k deferral?
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"This seems to be just a regular pre-tax 401k deferral for tax year 2022"
While it can be repaid to a different employer, or even an IRA instead of a 401(k), that isn't what is being attempted here.
You can't repay the distribution as a rollover, amend the tax year for purposes or otherwise not have reportable income from that distribution, and then also get a pretax benefit of that rollover. Reporting it as taxable, then getting to exclude it by repayment, are the offsets of each other. Also making the repayment from pretax funds is the double-dip.
Did he tell the employer this is what he wanted to do? Their plan would need to accept this type of rollover; it's not a given.
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