CARES Act Distribution Rollover
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Ray71
Returning Member

CARES Act Distribution Rollover

Based on the CARES Act I I drew $100K from my 401K account and received the funds in my bank account on Dec 2, 2020.   I want to rollover the $100K to my personal IRA in Vanguard rather than return it to my 401K.  

 

Questions: 

1) I have an electronic transfer established from my checking account to my Personal Vanguard IRA account.  If I electronic transfer $100K from my bank account to my Personal Vanguard IRA account within 60 days that I received $100K from my 401K, will this be considered a rollover?

 

2)  Do I need to request from Vanguard that states that $100K electronic transfer from my bank account to my Vanguard Personal IRA account is a rollover?

 

3)  How do I handle this roll over in Turbo tax? 

5 Replies
dmertz
Level 15

CARES Act Distribution Rollover

You'll need to explicitly inform Vanguard that the amount being moved to the IRA is a repayment of a Coronavirus-Related Distribution (CRD), otherwise they will not be able to code it correctly on your 2021 Form 5498.  Contact Vanguard and ask them in what ways you are permitted to transfer the funds to them for this purpose.

 

This repayment before the due date of your 2020 tax return will be reported on the same 2020 Form 8915-E that reports the original CRD.  The IRS has not yet released this form, so it has not yet been implemented in TurboTax.  However, the handling will be similar to the handling of various distributions related to disasters such as hurricanes and wildfires in recent years.

macuser_22
Level 15

CARES Act Distribution Rollover

Delete - see @dmertz answer.

**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.**
dmertz
Level 15

CARES Act Distribution Rollover

macuser_22 expressed a good point (subsequently deleted) that, since the distribution was from a 401(k), if the rollover is completed by the 60th day after the date of the distribution, there might not be a need to treat it as a CRD.  However, if you were not otherwise eligible to take this money out of the 401(k) (because you had not yet reached age 59½ and were still working for the company) not reporting it as a CRD could cause the IRS to consider it to be a hardship distribution that is not eligible for rollover, and the rollover would instead be an excess contribution to the IRA.  Since there is no downside to reporting it as a CRD if you actually qualified to receive a CRD, it might be best to just report it as a CRD.

macuser_22
Level 15

CARES Act Distribution Rollover

That is why I deleted it because the original 401(k) distribution might not have been allowed at all if not a CRD, but thinking about it, I do not see how the certifying to the employer that the distribution is allowed because of COVID-19, and the tax reporting must be on the 8915-E as a CRD when not asking for any of the CRD tax treatments  (3 year payback) and done within 60 days as a normal rollover.    I am not sure that one requires the other.

**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.**
dmertz
Level 15

CARES Act Distribution Rollover

I don't know that one requires the other either, but there is no reporting by the plan to indicate one way or another that it was a CRD and not a hardship distribution (if the distribution would have to be a hardship distribution in the absence of a CRD), so reporting it on Form 8915-E would be attesting to the fact that it was a CRD and that might carry some weight in the unlikely event that the IRS did question it.  I can't see any downside to reporting it as a CRD and its rollover other than having to wait for the Form 8915-E to become available.

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