1099-R

[KCWhelehan]

If I took a distribution from my IRA in 2019 due to Covid19. I can spread that distribution over three years?

What about the tax withheld which is 10% of the distribution. Should I distribute that tax over three years?

[PattiF]

Yes, you are able to spread the distribution over three years. The 10% additional tax on early distributions does not apply to any coronavirus-related distribution. You do not have to pay the additional 10% tax.

For more information, see this link:  CARES Act and Retirement

[SteamTrain]

The form required to do that will not be ready until 24 Feb...or later...but right now they think 24 Feb.

The withheld taxes will ALL be applied to 2020, even if you spread the distribution itself over 3 years.  So you could get a larger refund this year, and have extra to pay in the next couple years.

https://ttlc.intuit.com/community/tax-topics/help/why-am-i-getting-getting-a-10-penalty-on-my-1099-r...

[KCWhelehan]

I'm still confused. In box 4 on 1099-R, I had 10% of the distribution withheld. What number do I report on my 2020 taxes?

[KCWhelehan]

Thanks. I have another question.

After I answered the stimulus questions my Fed Tax doubled. 

I received both checks in 2020. Why is that taxable? I thought they were non-taxable.

[VolvoGirl]

You are not paying tax on them.  But Turbo Tax started out by giving you credit for the whole amount so you refund was too high.  Then when you entered what you already got the starting refund was reduced or the tax due increased.  You don't get it twice.

[KCWhelehan]

Thanks.

[KCWhelehan]

How does the IRS consider paying back a Covid19 distribution? If for example, you take a $36,000 distribution from your 401K in 2020 and have Fed Tax with held of 10%. You take the income over three years of $12,000 (2020-2022).

If you contribute $11,000 to your 401K in 2020, you are only taxed on $1,000 difference? If you contribute more than $12,000 in 2021 you do not include the $12,000 as income?

And I understand, the $36,000 is not subject to a 10% penalty according to the Cares Act?

[DawnC]

The 10% that was withheld was all applied to your 2020 tax return, but the tax is being spread over 3 years.   So, you reported $12K on your 2020 return and will do the same this year (2021) and on next year's tax return, 2022.   If you recontributed $11K, it is excluded from income leaving the $1K to be reported as taxable this year.   If you re-contribute more than $12K, you would report no distribution income on this return and you can file an amended 2020 for the excess amount to lower your tax on the previous year's return.  

No, there was no 10% penalty on qualified covid distributions (up to $100K) in 2020.    That section is not ready in TurboTax yet; but it should be soon.  

What is Form 8915-F Qualified 2021 Disaster Retirement Plan Distributions and Repayments?

The CARES Act also provides that any part of a COVID-19-related distribution is eligible for tax-free rollover treatment to be recontributed to a qualified plan within three years of receipt and therefore excluded from income. Any amount recontributed is treated as a direct tax-free rollover where eligible or as an indirect rollover with the typical 60-day requirement adjusted to three years. A recontribution is not subject to the one-rollover-per-year limitation.

[KCWhelehan]

Thanks for the update.

I'll have to amend the 2020 tax return, I did not include my 401K contributions to the 2020 distribution.

In addition,  I caught another mistake, a 10% penalty that was added to my tax bill on the 2020 initial distribution.

I'll wait for the 2021 update on Turbo.

Thanks.

[SteamTrain]

@DawnC  and @KCWhelehan 

I am a bit confused by your terminology here, and perhaps a subtle distinction.

I thought the "recontribution" had to come from personal outside funds to qualify as a payback ?

or am I wrong?

i.e. a 401k participant who has regular contributions to their 401k as a regular payroll deduction (Code D in box 12).....I thought those $$ cannot be considered part of the payback, and I'm not sure that is being made clear.  IF that is true, it needs to be clarified that the payback $$ must come from either writing a check to the plan  as a payback, or perhaps a separate deduction from paycheck being paid back as-if a loan and not as an actual "contribution".

IF that is the case, perhaps "contribution" or "recontribution" should be replaced by "payback" (rollover payment?) when discussing this.

[KCWhelehan]

That's the question. What does the IRS consider as a payback. Writing a check or payroll contributions?

There needs to be clarification on this.

[fanfare]

your regular payroll deduction for 401k cannot be considered payback of a COVID-related disaster distribution.

Not to mention, you're already getting a deduction for that.

[KCWhelehan]

Thanks for the update.