The correct way to do it would be to "mirror" exactly what happened. i.e. file an amended return for 2020 and 2021, reporting the 1/3 inclusion of the withdrawal into income.
However, that being said, since you repaid your full withdrawal in 2022, you would be able to amend your 2020 and 2021 returns to show the distributions as not taxable.
A couple things to keep in mind are:
You must complete the repayment within three years after the date that the distribution was received.
If a qualified individual uses the 3-year ratable income inclusion method, such method cannot be changed after the timely filing of the individual’s tax return (including extensions) for the year of the distribution.
You must include the taxable portion of the distribution in income ratably over the 3-year period – 2020, 2021, and 2022 – unless you elect to include the entire amount in income in 2020. Whether or not you are required to file a federal income tax return, you would use Form 8915-E (which is expected to be available before the end of 2020) to report any repayment of a coronavirus-related distribution and to determine the amount of any coronavirus-related distribution includible in income for a year.
Something to consider here is since you never reported the COVID withdrawal, will the IRS take the position that the entire amount is taxable in 2020 because no election was ever made?
Below are links to IRS guidance on the COVID distributions. The IRS was following the same guidance provided in Notice 2005-92 that was issued for Hurricane Katrina victims in 2005.
Q7. May I repay a coronavirus-related distribution?
A7. In general, yes, you may repay all or part of the amount of a coronavirus-related distribution to an eligible retirement plan, provided that you complete the repayment within three years after the date that the distribution was received. If you repay a coronavirus-related distribution, the distribution will be treated as though it were repaid in a direct trustee-to-trustee transfer so that you do not owe federal income tax on the distribution.
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. See sections 4.D, 4.E, and 4.F of Notice 2005-92 for additional examples.
Click here for guidance from the IRS on COVID Distributions.
Click here for IRS Notice 2005-92.
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