My friend,
I am really trying to get it in to my thick head! But... I still need to run this by you, the Expert. We had some tough times and lost a member of our immediate family during the 2020 CoVin-19. Please help me to understand the affect of my tax error which I explain below. CARES Act:
On the 2020 Tax Return, Form 1099-R (Distributions from Pensions, IRAs, etc.) Line 4 (FITW) was 10% of Line 2a (say, $6K). This was due to COVIN-19.
So, the Payer (say, XYZ Financial Group) sent the IRS a check for $6K and sent me the rest of the monies ($54K).
Then on 2020 Form 1099-R Summary, Line 20a (IRA Qualified Disaster Distributions from Forms 8915-B, C, E) an Amount (say $20K) which is ADDED to Form 1040, Line 4b.
All the Fed Taxes were PAID ($6K), prior to receiving my monies from XYZ Financial Group ($54K).
2020 Tax Return, Form 8915-E (Qualified 2020 Disaster Retirement Plan Distributions and Repayment), Part II, Line 9 Box was NOT check marked. No numerical entry is made on Line 9.
2020 Tax Return, Form 8915-E (Qualified 2020 Disaster Retirement Plan Distributions and Repayment), Part II, Line 17 Box was NOT check marked, either. An entry of $20K is made on Line 17.
2020 US Tax Return, Form 1040-SR, Line 4b (Taxable Amount) (say $20K which is $60K divided 3 yrs from Form 8915-E).
I made an honest mistake by over paying the Taxes. The monies were withheld and sent to the US Treasury Department.
Now, I am attempting, with your help, to complete this year's Tax Return (2021), but I believe that my error on 2020 Return will be perpetuated over the next two years. My taxable income in 2021 is 1/3 less than 2020; however, the amount of monies owed near 50% more. I made less monies and owe about 50% more in taxes.
If you can help me wrap my head around what needs to be done to make sure the Government gets their share of my monies and I don't over pay portion in taxes. In 2020, we cashed out the $60K Annuity, PAID the 10% Fed Tax ($6K), Prepared 2020 Fed Taxes and made error, Form 1040, Line 4b, I added $20K to my taxable income and Paid taxes on it. Now, I cannot figure out how to fix the problem on 2021 Form 8915-F. In 2021, Form 8915-F will not allow any corrections or changes to be made. Lines 23 thru 26 have either zero or $20K. Those numbers appear to be coming from somewhere else. All the other Lines have no entry.
Thank you for your help in this matter. I truly appreciate your time and expertise.
God Bless,
AWB
