Quote:
Originally Posted by samiamham
but if its a cares act withdrawal and you do a rollover ira within the three year window wouldnt you be good with unemployment? Isnt the idea to avoid it be taxable income?
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In my eyes I say no because UI is not going to know nor will they track (IMO) the fact that you took a 401K distribution during CARES Act (subject to special rules). All they will see is you took taxable income (which is it is taxable income the minute you received it) from a 401K account. The distribution is still taxable, Feds are just giving you the option to pay the tax on it all in 2020 or spread the tax evenly over a 3 yr period 2020, 2021, and 2022. They are only waiving the 10% early withdrawal penalty if under age 59 1/2. Even if you were to do the 401K rollover to an IRA as mentioned above most likely it still will trigger an investigation and look into mitigating circumstances to show it was rolled over within the normal 60 days. And that can be explained and proven (re: the rollover to IRA).
I just don't think for countable UI income that UI is going to give you a 3 year leeway to decide if you will repay it back and/or do a rollover into an IRA. NO way not in my books do I see it happening. Also remember if paying back to your 401K plan you need to check with plan administrator and make sure they indeed will accept a payback (rollover contributions) as plan administrators are not forced to implement or change their rules on rollover contributions into their plans. You also need to be mindful of the rules on how many rollovers you can do.
"The IRS gives you 60 days from the date you receive an IRA or retirement plan distribution to roll it over to another plan or IRA. You’re allowed only one rollover per 12-month period from the same IRA. This one-rollover-per-IRA limit doesn’t apply to plan-to-plan rollovers and some other types of rollovers."
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