yes, the corona relief act provides that exemption

For 2021?  I thought that was only for 2020.

Dusty

The answer is No.

"if the money taken in 2021 was for covid reasons?"

There is no covid-declared disaster for 2021. That distribution is subject to ordinary tax and applicable penalty, unless it falls under one of the exceptions for 2021, in 2021, or this person qualifies to have no penalty.

I believe Consolidated Appropriations act 2021 extended penalty free withdrawals up to $100,000 to June 30, 2021. So if the withdrawals were made by that timeline ( June 30th or before), these withdrawals still qualify for penalty exemptions.

@akumarpsYou are incorrect!  It ended 12/31/2020 unless it is in qualified disaster area.  If you have been treating it differently then you are doing them wrong.

Dusty

@akumarps 

I stated it specifically. There is no covid disaster in 2021. Yes, the disaster withdrawal rules in CAA are more lenient. Officially, covid is no longer a disaster, in 2021.

The taxpayer has to live in an area covered by a disaster declaration in the timeframe given in the regulation. Covid isn't one of them, for 2021.