1099-R Code 1 CARES ACT withdrawal

Forum|Forum|5 years ago
January 26, 2021
3 replies
34 views

We took a CARES Act withdrawal in July and I received my 1099-R yesterday from TIAA but on the form its coded in box 7 with code 1 rather than code 2. I contacted the company to ask them to change it to a code 2 (because someone I chatted with yesterday via TurboTax said it should be) but they will not change it. Am I going to be taxed differently because of this code? TIAA said for the CARES withdrawals you can use either code but they couldn't say if I would be taxed differently because they are not tax professionals. I'm hoping someone here might know what I need to do to be sure I'm not penalized with more taxes on the withdrawal. Thank you in advance!

Best answer by MinhT1

Form 8915-E and its instructions will give guidance to how you should report your 1099-R to exempt your distribution from the 10% penalty.

MinhT1

Level 15

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. No date has been given by the IRS for the finalization of this document.

TurboTax will update this section after the IRS releases the final version of form 8915-E and its instructions. Please revisit this section at a later date.

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FourDurandsAuthor

Level 2

Thanks, I realize that I will need to use this form. My question is, will there be a different tax because of code 1 or code 2 on the 1099-r? Can you not answer this because this 8915-E form has not been approved yet?

MinhT1Answer

Level 15

Form 8915-E and its instructions will give guidance to how you should report your 1099-R to exempt your distribution from the 10% penalty.

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zennie923

Level 2

in 1099-r code is 1. will i have report all the amount in tax return

DawnC

Level 15

Yes, but if it was covid-related, you will be able to waive the penalty and spread the tax over three years. You can use the 8915-E to apply the relief whether it says 1 or 2 in Box 7 of your 1099-R. 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. @zennie923

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callied75

Level 2

Did you get a final answer on this? I am going through the same thing. The company I used said they will not change it and I am worried of the HUGE tax difference that was shown to me by my accountant. Like thousands of dollars difference. I also don't want to set myself up for an audit in the future. Any help or comments are appreciated.

CatinaT1

Level 15

The code 1 in box 7 is okay. If your withdrawal is eligible for covid relief, this is reported on form 8915-E. TurboTax asks if you have any exception that applies. When you say yes, you will get the option to add the exception to the penalty and the option to spread the withdrawal over 3 years.

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sengthayJ

Level 2

Part of my distribution was from a roth 401k, am I suppose to subtract that out from the total distribution and input that into column b? The directions are kind of confusing and unclear for my situation.