The provision is Disaster, and then Covid Disaster, specifically. The allowances to defer reporting the income for taxability purposes doesn't change if the distribution was Qualified or not. That is determined at the time of the distribution. You would need to do the due diligence or have it in your records that the client(s)' distribution Qualified as Covid-related. Once you have this done, the only other issues are the delayed reporting, clients' desire to repay, or to accelerate the reporting as income.

There also is a similar confusion over the SE tax deferrals. It is a delay in Payment, not in reporting. There is nothing else to put on any tax year, now. The clients simply need to make the required payments.

Because of all the covid provisions, employers have it much worse.