The recent stimulus bill changes The law temporarily loosens the rules on hardship distributions from retirement accounts. Here's a quote from a WSJ article.


The law temporarily loosens the rules on hardship distributions from retirement accounts, giving people affected by the crisis access to up to $100,000 of their retirement savings without a 10% penalty. The law doubles the amount 401(k) participants can take in loans from an account for the next six months to the lower of $100,000 or 100% of the account balance. (IRAs don’t permit loans.) For retirees, the law suspends for 2020 the mandatory distributions the government requires most to take from tax-deferred 401(k)s and individual retirement accounts starting at either age 70½ or age 72. —Anne Tergesen

Does anyone have any more details about what is considered a hardship and how you will prove this hardship on your 2020 taxes?

1 Answer 1


For employer plans such as 401(k) it nominally depends on the plan although many plans follow an IRS-defined 'safe harbor' (see the 6 items in question #2). You need to 'prove' your eligibility to the plan administrator when you request the distribution, although in practice they will usually just request a signed statement.

For an IRA you can take a distribution anytime you choose, without relation to hardship.

But in both cases unless you are over 59.5 (or disabled, or dead) (and for Roth earnings in addition you have had the plan/account at least 5 years), you are subject to 10% extra tax unless a statutory exception applies. This list is similar to but not the same as the list of hardship reasons to get an employer plan distribution. CARES adds an exception for 'coronavirus-related distributions' up to $100k per person to this list, with a pretty broad definition; IRS and/or Treasury will probably publish guidance on their interpretation of this as soon as they can and you might want to wait a few days to act unless you are already starving.

IRS usually does not update forms/instructions and most publications until the processing season for a given year approaches. Remember they are still processing returns for 2019, and the 'standard' deadline for that which would normally be in about two weeks has been delayed three months automatically, as well as the optional filing (but not payment) extension to Oct. 15 that is available in all years.

You normally don't, and I assume in this case won't, have to supply proof to the IRS, you just compute the excepted or not-excepted amounts on form 5329 according to the instructions -- which will presumably be updated appropriately for 2020. But like all items on your tax return, you should retain the supporting materials for possible audit until 3 years after the return due date (or 3 years after actual filing date or 2 years after last payment, if later).

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