My understanding is that a distribution from a taxable (non-ROTH) retirement account in TY 2020 can be allocated across up to 3 years (e.g. 1/3 2020, 1/3 2021, 1/3 2022). This is part of the congressional CARES Act that provides for the repayment of the withdrawal up through the year 2023 (not sure how the exact date that withdrawal must be repaid is determined). If repayment is made at latest possible date (sometime in 2023), you would have already paid taxes on the full withdrawal in TY's 2020-2022 (due to the 1/3 reporting described previously). To recoup the taxes already paid, you would have to file an amended return for TY's 2020-2022. My question is, how does TurboTax 2020 provide for this? Does one just take the distribution amount reported on 1099-R and divide by 3 and report that on the 1099-R in TurboTax (doesn't sound right, as there will be a discrepancy between what has been reported to the IRS and what has been reported on filed return), or will there be a provision in TurboTax to indicate that this is the intent. Would make sense (in my mind) that this would be the case, so that TurboTax would allocate the income across 2020 and subsequent 2 years when bringing forward 2020's data for TY 2021. This might be a little bit more complicated, in that 3 years is the maximum that the 2020 withdrawal can be spread across - my understanding is that one can always elect to take the entire tax hit (by allocating 100% of withdrawal) in 2020, or 1/3 in 2020 and 2/3 in 2021, etc. Not clear whether the 1/3 is minimum per year, or whether it's cumulative (i.e. at least 1/3 of withdrawal must be reported for TY 2020, 2/3 cumulative by TY 2021, and entire amount by TY 2022). At any rate, I'm thinking this election should be tracked in TurboTax for use in subsequent years.
