With tax concerns very much at the forefront of People’s thoughts in April, one area where many are a bit confused is with Qualified Disaster Distributions and how they vary from Stimulus Checks. With that in mind, in this post, we’ll cover all you need to know about the primary distinctions between Qualified Disaster Distributions and Stimulus Checks.
First off, what are Qualified Disaster Distributions? They are any dividend made out of a 401(k) plan that occurs after the first day of the event of a “qualified disaster” and before June 25, 2021.
The coronavirus pandemic was officially recognized as a “qualified catastrophe” in all 50 states of the USA and the District of Columbia also. Hence, people might take money out of their retirement plans to allow them to cope with the economic problems of the epidemic, albeit that sum could not exceed 100,000 dollars.
Stimulus Checks And Disaster Distribution Checks Are Not The Same
The essential thing to bear in mind here when it comes to filing taxes is that Qualifying Disaster Distributions are recognized as taxable income. Consequently, you require form 1099-R to record such revenue, with this form also assisting to confirm you’ve appropriately designated such payments as a Disaster Distribution. The stimulus checks that were sent out by the US government were different since these were advances of refundable tax credits. Hence, the checks were not taxable income and, if you have already claimed yours, they won’t alter the amount of tax you have to pay this April, nor will they raise or lessen your tax refund.
Just one of the checks was paid out in 2021 however, since the first stimulus check of $1,200 arrived in April 2020, the second check of $600 came in December 2020 and finally, the third stimulus check of $1,400 was issued in March 2021.
