Penalty Free Withdrawal of $100,000 401-K Under CARES Act

Will a penalty free withdrawal be available to an “owners” 401-K if that owners spouse (who has no retirement plan) is affected by one of the qualifying conditions for withdrawal under the CARES Act.



As currently stated in the CARES Act, the spouse would have to test positive (false negatives do not qualify) for the virus. The IRS or Congress might eventually broaden the CV distribution qualifications. In addition, the plan will eventually have to be amended to allow the CV distribution.



Just to be clear, an owner with a 401-K could withdraw up to $100,000 penalty free with the tax on that income spread rateably over three tax years (unless otherwise elected) if their spouse (who had no plan tested positive for the CV, correct?



Just to be clear, a 401-K owner can withdraw from their account up to $100,000 penalty free with tax to be paid rateably over three years ( unless otherwise elected) if their spouse who has no tax deferred account tests positive for CV?



Yes, that is correct. The penalty exception will probably have to be claimed by filing Form 5329 with the tax return.



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