@igould wrote:
Hi I was thinking further on this:
1) wouldn't the logical calculation to have set up would have the repayment, especially in the first year, "restate" the overall early distribution and then the net to be taxable over 3 years (so in my case 100k-45k repay = 55k remaining / 3 = 18.3k taxable each year) vs 100k / 3 = 33k - 2021 = 33k - 45k = -12k (no tax); Based on the way you described, years 2 and 3 will each have a taxable amount of 33k (assumes I don't pay back).
2) Also will the amount over the 1/3 payment I made in 2020, 12k be offset against 2021 33k?
#1) 1/3 pf $100K each year if you do not pay anything back. in 2020.
if you paid $55K back in 2020 then that leaves $45K remaining to be paid back in 2021 & 2022.
What makes more sense is irrelevant - Congress wrote the law this way.
#2 The CARES act says: "any amount required to be included in gross income for such taxable year shall be so included ratably over the 3-taxable-year period beginning with such taxable year."
The IRS has interpreted that to mean "split into 3 equal parts" i.e. $33.33K each of three years, but you can pay back any of the original $100K at anytime you wish.
I believe that makes $33.3K taxable in 2021 (unless paid back) and what remains taxable in 2022 if not paid back.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
