Q: Under the CARES act can I take a withdrawal from my 401(k) and use it to payback an existing 401 (k) loan?
One portion of The CARES act allows for withdrawals from your 401(k) without the typical 10% penalty. Additionally, it appears you can avoid the state and federal taxes if you put the equal amount back into the 401k within 3 years. In my scenario, would withdrawaling the funds to pay back an existing 401k loan meet the requirements to avoid the taxes? Additionally, if my normal contributions over 3 years would sum to the same amount I withdrawal is that considered sufficient to meet the avoidance of taxes?
A:
I believe the CARES Act requires specific purposes for the “use” and your intended purpose may not qualify. Talk to the custodian. I hope this helps. Zaher Fallahi, Esq, CPA (CA &D.C.).
Disclaimer: The information provided here is not intended for and may not be construed as solicitation, or legal and tax advice. For specific advice please consult your legal counsel.
Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.
The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.
Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.
