Cares Act 401k withdrawal - Pay Back Question

[Caseyblue]

So if I already filed & received refund, I have until Oct 15 to actually make my 1/3 repayment & do do need to file form 4868 for an extension ?

[macuser_22]

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@fanfare wrote:

@macuser_22 

This person does need to file Form 4868 since they need more time to pay back for 2020 as indicated in the filed tax return.

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See:

26 CFR § 301.9100-2 - Automatic extensions

(b) Automatic 6-month extension. An automatic extension of 6 months from the due date of a return excluding extensions is granted to make regulatory or statutory elections whose due dates are the due date of the return or the due date of the return including extensions provided the taxpayer timely filed its return for the year the election should have been made and the taxpayer takes corrective action as defined in paragraph (c) of this section within that 6-month extension period.

[Caseyblue]

Not sure I understand.

So if I already filed & received refund, I have until Oct 15 to actually make my 1/3 repayment & do not need to file form 4868 for an extension ?

[macuser_22]

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@Caseyblue wrote:

Not sure I understand.

So if I already filed & received refund, I have until Oct 15 to actually make my 1/3 repayment & do not need to file form 4868 for an extension ?

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No.  If you files then the extension to Oct 15 to make the repayment for 2020 is automatic as long as it is made before Oct 15 and you amend by then.

[Caseyblue]

What would I amend?

When I filed, I indicated that I would be making the 1/3 repayment 

[macuser_22]

If you already claimed that you repaid  it then all you need to do is actually make the repayment.  Nothing else is necessary.

(When you said that you did not pay it, I assumed that you had not already claimed that you did.)

[Caseyblue]

And I have till Oct 15th to make the repayment?

[macuser_22]

Yes.

[fanfare]

ok @macuser_22 

BUT

"So you can pay back up to the line 9 amount up to Oct 15."

You can pay back any amount up to Oct 15, that amount goes on Line 10.

It could be one third, two thirds, all or any other other amount.

(if you paid back all, there would be no point splitting it in three).

This filer must pay back the amount filed on line 10, or line 18 for IRAs, exactly.

Otherwise, he'd have to amend to file the new different amount.

[macuser_22]

Yes you can pay back any amount but not for 2020 which I thought the question was about.  I quoted above that any amount more then line 9 will carry to 2021.

[fanfare]

 "I quoted above that any amount more then line 9 will carry to 2021."

you are saying Any amount more than line 9 will carry forward as amount paid back in 2021.

I assumed you still paid back in 2020 the amount on line 10.

Through all this since February, I guess I was misreading the 8915-E instructions.

You are reading it differently, I'll have to think about that way of looking at it.

I've been wondering how to report on 2021 since my line 18 is greater than line 17, 

This changes my whole analysis.

[macuser_22]

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@fanfare wrote:

 "I quoted above that any amount more then line 9 will carry to 2021."

you are saying Any amount more than line 9 will carry forward as amount paid back in 2021.

I assumed you still paid back in 2020 the amount on line 10.

Through all this since February, I guess I was misreading the 8915-E instructions.

You are reading it differently, I'll have to think about that way of looking at it.

I've been wondering how to report on 2021 since my line 18 is greater than line 17, 

This changes my whole analysis.

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Re-reading it, I believe it means that you can pay back any amount up to the total before the due date or the extended due date and report it on the 2020 tax return.    If returned after that it would be a 2021 repayment.

Lines 10 & 18 both say:  Enter the total amount of any repayments you made before filing your 2020 tax return. But don’t include any repayments made later than the due date (including extensions) for that return.

Which says that you DO enter repayments on those lines if there were made before the due date or extended due date. 

I think you read it correctly.

[Caseyblue]

I’m CONFUSED!

Someone said elsewhere:

”You have until the due date of your 2020 return, May 17, 2021, to repay any portion of your covid distribution and have it count for tax year 2020.   You are not required to repay the covid distributions, but you can.   Be sure to enter any 1099-Rs you received before you file.   You can file an extension which gives you an extension to file, but not to pay your tax bill.   That still has to be done by 05/17/21.”

[fanfare]

@Caseyblue 

Why are you confused.?

macuser_22 has shown that you have until Oct 15 to return some or all of your distribution.

If you decide to return an amount different than what you filed, or none of it, only then you would amend your return to put the true amount.

[Caseyblue]

I am confused because:

DawnC

Employee Tax Expert

yesterday

You have until the due date of your 2020 return, May 17, 2021, to repay any portion of your covid distribution and have it count for tax year 2020.   You are not required to repay the covid distributions, but you can.   Be sure to enter any 1099-Rs you received before you file.   You can file an extension which gives you an extension to file, but not to pay your tax bill.   That still has to be done by 05/17/21.  

If you need to take money out of your retirement account early due to COVID-19, you can do that penalty free in 2020.    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

[Caseyblue]

You have until the due date of your 2020 return, May 17, 2021, to repay any portion of your covid distribution and have it count for tax year 2020.   You are not required to repay the covid distributions, but you can.   Be sure to enter any 1099-Rs you received before you file.   You can file an extension which gives you an extension to file, but not to pay your tax bill.   That still has to be done by 05/17/21.  

If you need to take money out of your retirement account early due to COVID-19, you can do that penalty free in 2020.    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