1099-R Covid Distribution

Forum|Forum|5 years ago
March 9, 2021
18 replies
82 views

I'm doing my taxes for last year, and I'm stuck on what to do about the distribution I took from my 401K last year.

I have the option to pay all the taxes now on the amount that I withdrew, or spread it out over three years. If I spread it out over three years, how is that money counted for taxes? Is it considered taxable income?

I don't want to end up with a huge tax bill next year or the year after if I make the wrong decision now.

Not A Product Question

Best answer by MinhT1

If you choose to spread the taxation of your COVID distribution over three years, then one third of the amount of the distribution will be added to your taxable income to be taxed in each of the three tax years 2020, 2021 and 2022.

For example, if you withdrew $30,000, then $10,000 will be added to your taxable income in each year 2020, 2021 and 2022.

MinhT1Answer

Level 15

For example, if you withdrew $30,000, then $10,000 will be added to your taxable income in each year 2020, 2021 and 2022.

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DavG

Level 2

No, it doesn't. TurboTax Desktop goes through the process in the Income section and shows only 1/3 being included in taxable income - but when you get to the end of the Federal Tax section, it shows the ENTIRE distribution under "Taxable Income". This is an Error. How do I fix this?

macuser_22

Alumni - Champ

@DavG wrote:

No, it doesn't. TurboTax Desktop goes through the process in the Income section and shows only 1/3 being included in taxable income - but when you get to the end of the Federal Tax section, it shows the ENTIRE distribution under "Taxable Income". This is an Error. How do I fix this?

The summary screen it gross income (The 1099-R box 1 amount as required) not taxable income. Taxable income is on the 1040 form line 4b or 5b depending on the type of account.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

macuser_22

Alumni - Champ

@G4Captain wrote:

I'm doing my taxes for last year, and I'm stuck on what to do about the distribution I took from my 401K last year.

I have the option to pay all the taxes now on the amount that I withdrew, or spread it out over three years. If I spread it out over three years, how is that money counted for taxes? Is it considered taxable income?

Yes. 1/3 would be taxable income in each year, 2020, 2021 and 2022) or if you choose the option to pay all the tax in 2020, it will all be taxable in 2020.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**