My wife took total distribution of her retirement account in 2020 and we received a 1099-R which shows federal income tax was taken out. when filling 2020 tax i included the 1099-R and said it was due to COVID-19 which was the case. so this year, when i'm doing my taxes it asking me to pay tax on the 1/3 of the full amount when in reality i already paid taxes on it to begin with since the distribution code on 1099-R is 1(early distribution). why is it making me pay tax all over again? Do i need to amend my 2020 tax return to correct the issue? i might as well pay the 10% early withdrawal penalty than pay tax on the whole amount again.
