Premature Distributions from Qualified Plan

Forum|Forum|5 years ago
February 13, 2021
6 replies
30 views

Has anyone come across anyone that did not qualify for the premature distribution exclusion due to Covid in 2020?

ProSeries Professional

This topic has been closed for replies.

qbteachmt

Level 15

What an odd question; yes and no?

Perhaps they do, in fact, qualify? Or, perhaps the distribution does not qualify?

Don't yell at us; we're volunteers

dascpa

Level 11

Many investment advisors told clients they could take up to $100,000 and spread the taxes over 3 years. But they forgot to include that there must a COVID related reason for the distribution. To answer your question - yes, I've had any clients think it was an easy way to get income averaging and now they're finding out the truth.

T

tscottAuthor

Level 5

The first requirement is that the distribution is made to a qualified individual. The definition of a qualified individual in Section 2202(a)(4)(A)(ii) of the CARES Act is fairly generous. A qualified individual is anyone who has been diagnosed with COVID-19 by a test approved by the Centers for Disease Control and Prevention or has experienced adverse financial consequences due to being quarantined, furloughed, or laid off; having work hours or pay reduced; having been unable to work due to a lack of child care; having owned or operated a business that has been closed; having a reduction in self-employment income; or having a job offer rescinded or a start date delayed. An individual also qualifies if his or her spouse or a member of his or her direct household has experienced any of the above.

It seems this exclusion easily attainable.

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