I made a qualified CARES act withdrawal from my TSP account in October 2020. Do i need to report anything on my 2020 tax return an/ how?

[EgorFed]

I made a qualified CARES act withdrawal from my TSP account in October 2020. Do i need to report anything on my 2020 tax return and how? I made a $40,000 withdrawal with $5,000 designated for federal withholding. How do i reflect in on my federal tax return? I keep reading about form 8915-E, but is unable to locate the form anywhere and cant find where would I enter it in TurboTax software.

[MinhT1 · Accepted solution]

The Coronavirus-related relief measures for retirement plan distributions have to be reported on form 8915-E which has not yet been finalized by the IRS.

TurboTax will update this section shortly after the IRS releases the final version of form 8915-E and its instructions.

[jdkluck]

So once the IRS finalizes the form it should be available in TurboTax so we can complete our taxes?

Just was not sure if it would not be supported and would have to file separately after initially filing. I assume the TurboTax website for forms just says unsupported because the form is not released yet and that it does not mean it will not be supported once it is released. Right?

[CatinaT1]

You are correct.

You will report this on a Form 8915-E.  The IRS has not yet finalized the Form 8915-E for retirement plan distributions under the CARES act.  So this form cannot be included in the TurboTax program.  You will not be able to proceed until the form is available.

The IRS has not communicated when the form will be finalized for inclusion on the 2020 federal tax return.

We estimate it will be sometime in February 2021 before the form is available.  You can watch this link for the form availability.  Currently, the form is not listed here since there is no estimated date.  Once there is, you will find the form listed with the date available.  

IRS forms availability table for TurboTax individual (personal) tax products

Please sign-up here and we will email you once the form is live.

[mrtmpetty]

Do we have an update or estimate on when the software will be updated?

Form 8915-E seems to be available now... But I still don't see the form available in TurboTax 2020 (Deluxe)?

https://www.irs.gov/pub/irs-pdf/f8915e.pdf

8915-E still isn't showing on the Form Availability page either?

https://care-cdn.prodsupportsite.a.intuit.com/forms-availability/turbotax_fed_windows_individual.htm...

Hoping to have some help with filing this form from the Step-by-Step > Federal Taxes > Wages and Income > Retirement Plans and Social Security Section ( IRA, 401(k), Pension Plan Withdrawals (1099-R) section.  Currently... while adding my 1099-R forms there is no option to identify the distribution as a Coranavirus-Related  Distribution (CRD). 

[jdkluck]

One other question I have is, with the CARES Act withdrawal from my TSP according to TSP I am able to pay back my withdrawal back (fully or partially) into my TSP account and not have it count as taxable income.

How will I determine that or how does that work? Do I need to know right now how much I plan on paying back so I know how much would be taxable and then could setup the taxable portion over 3 years? 

Just was not sure but I did plan to pay back at least 50% of what I withdrew back into my TSP, if not more before the 3rd year of the date I did the withdrawal.

Just was not sure how I would do this in taxes at all.

This was an xerept from the TSP website regarding CARES act withdrawal.

Favorable tax treatment for coronavirus-related withdrawals

The tax advantages for qualified individuals who took coronavirus-related distributions are as follows:

-The IRS waived the 10% additional tax on early distributions.
-You may spread the taxable income “ratably” over a three-year period, starting with the year in which you receive your distribution. For example, if you receive a $9,000 coronavirus-related distribution in 2020, you could report $3,000 in income on your federal income tax return for each of 2020, 2021, and 2022. This is optional; you can also choose to include all of the income in the year of the withdrawal.
-You may repay all or part of the amount of your coronavirus-related distribution to an eligible retirement plan, provided that you complete the repayment within three years after the date that you received the distribution. If you repay a coronavirus-related distribution, the distribution will be treated as though it were repaid in a direct plan-to-plan transfer so that you do not owe federal income tax on the distribution. The law allows you to repay coronavirus-related distributions to the plan from which you received it or to another eligible retirement plan.

[DawnC]

Yes, you will be able to waive the penalty and spread the tax over 3 years (2020-2022).  And if you all or part of it back within those three years, you can get a refund of those taxes.  However, the form you need to claim the covid tax relief is 8915-E - and it won't be in TurboTax until the end of the week.   So, you will need to come back and enter your 1099-R this weekend to get that relief.   

You can use the link below to sign up and be notified when it is available. 

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 qualify 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
• You had work hours reduced to COVID-19
• You’re unable to work due to child care closure or hour reduction

The distribution would be taxed over 2020, 2021, and 2022. You’ll have that time to pay back the funds you withdrew, without the amount impacting that year’s cap on contributions, and if you pay back the amount within that time, you’ll be able to claim a refund on those taxes.

Please sign-up here and we will email you once the form is live.    @jdkluck

[jdkluck]

Thanks for the reply I do appreciate it.

So mainly I will need to claim all the taxes spread-out through the 3 year period. Then when I pay back part of the withdrawal into my TSP I would then just have to file for a refund in the next tax year?

So if I pay anything back into my TSP this year, next year I would claim a refund? Or would I have to wait until 2022 to claim the refund after the 3 years is up for the total amount that I paid back into my TSP?

Thanks

[DanaB27]

Yes, if you pay back the full amount to the TSP this year then you won't have to include any income in regards to the distribution on your 2021 tax return. 

You will also amend your 2020 tax return to get a refund on the taxes paid in regards to the distribution.

Please see this example from the IRS:

"If, for example, you receive a coronavirus-related distribution in 2020, you choose to include the distribution amount in income over a 3-year period (2020, 2021, and 2022), and you choose to repay the full amount to an eligible retirement plan in 2022, you may file amended federal income tax returns for 2020 and 2021 to claim a refund of the tax attributable to the amount of the distribution that you included in income for those years, and you will not be required to include any amount in income in 2022."

@jdkluck 

[jdkluck]

Thank you for that example from the IRS appreciate it.

So mainly wait for Turbo Tax to update to include the new form (8915-E)  so I can select option to spread the dispersements out over a 3 year period.

Then as I pay off all or part of the funds back into my TSP I would make an amendment to the previous years tax return (based on the amount I actually paid back) and depending on how much I paid back in the current year may or may not be required to pay taxes on it.

Did the 8915-E get updated yet? I thought I saw something where you could start to do it on 2/24/21 or was that just when it was available but that does not mean TurboTax has been able to incorporate it into there software yet?

[DanaB27]

You are welcome. Yes, you wait for Turbo Tax to update to include the new form 8915-Es o you can select option to spread the distribution out over a 3 year period.

Yes, when you pay off all or part of the funds back into your TSP you would amend your previous years tax return based on the amount you actually paid back. And depending on how much you paid back in the current year then you may or may not be required to pay taxes on it in the current year.

The new release date for Form 8915-E is 2/25, please sign up here to get notified when the form is ready.

[jdkluck]

Thank you.

I did check the link after I sent the message and saw the date changed from the original date of 2/24 to 2/25.

Much appreciated.

[jdkluck]

Do we just need to wait for the form to say "AVAILABLE" on the website (the link below)? I assume that is when it actually would work with TurboTax correct?

Just was curious since I went into TurboTax earlier and there was no update and nothing really changed. Do I need to re-enter my 1099s or can I just go and do UPDATE on them since I have them entered already?

8915-E still isn't showing on the Form Availability page either?

care-cdn.prodsupportsite.a.intuit.com/forms-availability/turbotax_fed_windows_individual.html

[WendyN2]

No, you will not have to re-enter anything as when the update is completed, then the update gets applied to your return, when you run the checks the next time after all of this, the system will now read that there is a place for the information to go - or, basically, all places it should flow to are now in the update.