No, you do not have to get your 1099-R's corrected. If you needed to take money out of your retirement plan, keep in mind that the 10% early withdrawal penalty may be waived on up to $100,000 of retirement funds withdrawn if you are a qualified individual impacted by coronavirus.
You are a qualified individual if:
- You, your spouse, or dependent are diagnosed with COVID-19
- You experience adverse financial consequences as a result of being quarantined, furloughed, or laid off
- You had hours reduced due to coronavirus
- You are unable to work due to your child care closing or reducing hours
Even if the 1099-R's state the distribution was made under code 1, Early distribution, no known exception, or code 2, Early distribution, no known exception, you will be able to report the income correctly on your tax return. You would do this by using the number 12 exception on Form 5329. This exception is classified as other, which includes Covid-19 related distributions.
When you receive your 1099-R's, TurboTax will allow you to classify your distribution with an exception code. The distributions are income over a three-year period. For example, if you receive a $9,000 coronavirus-related distribution in 2020, you would report $3,000 in income on your federal income tax return for each of 2020, 2021, and 2022. You also have the option of including the entire distribution in your income for 2020.
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