Penalties were waived on 401(k) and IRA withdrawals for coronavirus costs, but you still owe the taxes. April 23, 2021, at 11:41 a.m. Normally a withdrawal from a 401(k) or IRA before age 59 1/2 would incur a 10% early withdrawal penalty, but the CARES Act waived this penalty for 2020.

Is the CARES Act still in effect for 401k?

From January 1-December 30, 2020, the CARES Act waived the 401(k) early withdrawal penalty. However the government did not extend this provision of the CARES Act for 2021. The new legislation that does impact 2021 is called the Consolidated Appropriations Act, signed into law on December 27, 2020.

When to rollover 401k to IRA under CARES Act?

If considering taking advantage of a penalty-free distribution and use the funds as an IRA rollover, it is important to remember that, if under the age of 59 1/2, the intent of the CARES Act was to offer plan participants impacted by COVID-19 needed liquidity and not greater investment diversification.

Is there a 60 day rollover for 2020 RMD?

Earlier this year, the IRS extended the 60-day rollover requirement to July 15, 2020, for a 2020 RMD taken as early as Feb. 1, 2020. The odd result was that only individuals who had taken 2020 RMDs in January 2020 were not eligible for non-taxable rollover treatment for their January 2020 RMD distributions.

Can a Solo 401k be distributed under the CARES Act?

However, if you have a Solo 401 (k) plan, since you are likely the trustee and plan administrator of the plan, you can approve the distribution request and do not have to rely on a third-party. In other words, you would be in charge of approving your request to take up to a $100,000 penalty-free distribution under the CARES Act.

When to take advantage of the CARES Act?

If you gain access to your 401 (k) plan funds because you are either over the age of 59 1/2 or you satisfy the CARES Act provisions, assuming your employer includes the CARES provision in the plan, you will have access to taking advantage of the $100,000 penalty-free distribution.