Cares Act

Used the CARES ACT and withdrew some money out of my 401k back in June.  Get my taxes to my accountant last week and tells me I cant waive the 10% penalty withdrawal fee.  I quarantined 2x and ran into some financial adversities.  The Cares act states if you have financial adversity or covid (which I didn't) you can take from your 401k plan.  Why is he telling me the 10% withdrawal fee cant be waived????  Is there anything I can do/say?  It says directly on the form from Fidelity that I have that you can pull from 401k with no penalty as long as you a.  have covid or b. have financial adversity.  How is he to question??  I'm not running from paying the taxes on the amount withdrawn......I don't get it! Should I just tell him I had covid then???  or are CPA's then needed of a doctors note???

Any tax expertson here....?

Thanks!

You would need a copy of the positive test for COVID.  That won't work.

Why did the accountant say you couldn't waive it?

You would need a new accountant if you feel like you should get it.  You probably should have asked the accountant before the withdrawal.

Are you an employee?  Do you have pay stubs showing reduce income?

Full transparency, income was basically net neutral from the previous year.  I potentially could have made 20k more with bonus but that was impacted due lost sales due to covid.  I also quarantined twice.  Essentially i was just pulling out of my 401k to get some extra $ and use the quarantine and reduced bonus as a crutch to why i fit the criteria.  The cares act doesn¡¯t specify a % lost vs prior year. Ya sure i made the same but also should have made 20k more and i did 25k of work on my house and was counting on that 20k from bonus to offset the house work in which i didn¡¯t get due to covid.  

follow?

Not saying i am right, i don¡¯t know!

Accountant basically said ya you don¡¯t fit the hat to get the 10% fee waved.  He said if he saw reduced income of roughly 15% sure no problem. Well nothing that i ever read from irs/fidelity states you need to be at a reduction of 15% vs prior year to get the fee waived.  It did say it applies if you 1. have covid or 2. suffers financial consequences due to laid off, furlough OR QUARANTINE.

I would consider thee option of a loan against your 401.

Theres no penalty and you normally pay it back slowly over a 5 year period.

If you become disconnected from your employer you may have to pay it back sooner.

Dont know your situation but always better to borrow against rather then pulling out.