Millions of Americans rushed to finish their taxes this year, but found themselves confused over things like stimulus checks.
In addition to the stimulus checks, there’s something called a Qualified Disaster Distribution.
There are differences between the two that taxpayers need to be aware of.
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Qualified Disaster Distributions explained
A Qualified Disaster Distribution is any distribution that was paid out of a 401K plan on or after the first day of a qualified disaster.
It must have been between that day and June 25, 2021.
Americans could use the pandemic as a qualified disaster in all fifty states and Washington D.C.
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People were able to take out up to $100,000 from their retirement plans with no penalty.
There is no penalty for withdrawal. The money does count as taxable income on your tax return.
Form 1099-R is used to report that income.
Stimulus checks aren’t the same as Qualified Disaster Distributions
Stimulus checks are considered an advance on a refundable credit.
These do not count as taxable income.
If you received your check already then you do not need to worry about claiming it.
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