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What is Form 8915-E Qualified 2020 Disaster Retirement Plan Distributions and Repayments?

The CARES Act provides tax relief for up to $100,000 of COVID-19 related distributions from eligible retirement plans. So, if you, your spouse, your dependent, or a member of your household was impacted by the coronavirus and you withdrew from your retirement accounts in 2020 before the age of 59 ½, you may not have to pay the 10% early withdrawal penalty (or the 25% additional tax for SIMPLE IRAs) with Form 8915-E. It also allows you to spread the taxable portion of the distribution over three years, if needed.

We'll complete and include Form 8915-E with your return if you qualify. Just enter your Form 1099-R and answer a few questions to determine your eligibility.

To qualify for Form 8915-E and to be exempt from the early withdrawal penalty due to COVID-19, a few rules have to be met.

1. You have to be a qualified individual. To qualify, one of these must be true:

  • You, your spouse, or your dependent were diagnosed with COVID-19
  • You experienced adverse financial consequences as a result of being quarantined, being furloughed or laid off, or having work hours reduced due to COVID-19
  • You experienced adverse financial consequences as a result of being unable to work due to lack of child care due to COVID-19, or
  • You experienced adverse financial consequences as a result of closing or reducing hours of a business that you own or operate due to COVID-19

2. The withdrawal had to come from an eligible retirement plan, which could be any of the following:

  • A qualified pension, profit-sharing, or stock bonus plan (including a 401(k))
  • A qualified annuity plan
  • A tax-sheltered annuity contract
  • A governmental section 457 deferred compensation plan
  • A traditional, SEP, SIMPLE, or Roth IRA

3. The distribution had to have been made in 2020 before December 31, 2020.

There is also a $100,000 distribution limit to the exemption. Any distributions over that amount, may be subject to the additional tax.

You have two options to pay tax on the distributions you took due to COVID. Option number one, you can report the income over three years, starting with the year you received your distribution. So, for example, if you withdrew $15,000 in 2020 because of COVID, you would report $5,000 in income each year on your return for 2020, 2021, and 2022. Option number two, you can include the entire distribution as your income in 2020.

Yes, you can repay all or part of the distribution you took within three years that it was received. If it was due to COVID-19, it’ll also be treated in a way that you won’t owe federal income tax on the distribution.

For example, if you withdrew in 2020, and you report the income over 3 years (2020, 2021, and 2022), but decide to repay the full amount in 2022, you can amend your 2020 and 2021 federal returns to claim a refund of the tax from the distribution that you included in income for those years, and you would also avoid having to pay income tax on your 2022 return.

Right now, states are deciding whether or not they will treat these distributions the same way as the IRS, taxing them over 3 years, or taxing them entirely in the year it was withdrawn. We are continuously monitoring every state’s approach to Form 8915, and will update TurboTax as soon as possible.

If you’ve already started your return and have seen a screen indicating you may need to adjust your state taxable amount, it likely because your situation isn’t ready yet. From here, you can calculate the state amount, enter it yourself, and file your return. We will continue to roll in more updates in upcoming releases.

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