The reason you got the 1099-R is because you were laid off due to COVID. The reason you took the loan to start with is not related.
Because of COVID, you may qualify to claim one third of the income each year for 3 years rather than putting it all in this year. Use form 8915E if you qualify to make that election.
To be affected by COVID, you or someone in your house were diagnosed with COVID, you experienced adverse financials consequences as a result of COVID due to ability work, reduced hours and more. See Coronavirus-related relief for retirement plans and IRAs. Most people were affected by COVID.
The IRS is updating form 5329’s instructions to make it clear that COVID related exceptions cannot use 5329 and should use the new 8915-E.
- Go back through the program, edit the 1099-R, and mark that you were affected by COVID.
- You may need to return to the Form 5329 and delete it. See How to Delete
See What is Form 8915-E Qualified 2020 Disaster Retirement Plan Distributions for qualification.
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