Retirement tax questions

 TurboTax will most likely ask you about this distribution in the following years if you qualify. Please be aware that all tax withheld on your 1099-R will be credited towards 2020 and you might have to adjust your withholdings to account for the additional income in the next two years when you choose to have the distribution taxed over 3 years.

You qualify to spread the withdrawal from your 401k over three years if :

• You, your spouse, or your dependent are diagnosed with COVID-19
• You experience adverse financial consequences as a result of being quarantined, furloughed, or laid off or having work hours reduced because of COVID-19
• You’re unable to work due to child care closure or hour reduction because of Covid-19
• You experience adverse financial consequences as a result of closing or reducing hours of a business that you own or operate due to SARS-CoV-2 or COVID-19.

Those who qualify as individuals directly impacted by the pandemic will be able to withdraw up to $100k from their retirement accounts without facing the 10% early withdrawal penalty.

You can choose to have the distribution taxed over 2020, 2021, and 2022 instead of only in 2020. You’ll have three years to pay back the funds you withdrew, without the amount impacting that year’s cap on contributions. If you pay back the amount within that time, you’ll be able to claim a refund on those taxes paid when you file an amended tax return. Please see IRS Coronavirus-related relief for retirement plans and IRAs for more details.

Please follow these steps to enter your 1099-R (once the form is ready):

1. Login to your TurboTax Account 
2. Click on the Search box on the top and type “1099-R”
3. Click on “Jump to 1099-R” and you should see the “Your 1099-R Entries” screen
4. Click "edit" and continue until "Tell us if any of these uncommon situations apply" screen
5. Select "I took out this money because of a qualified disaster (includes COVID-19)" (TurboTax will walk you through questions once this section is ready)