COVID-19 401K early withdraw California State Tax

[turbota888]

I took an early 401K distribution under cares act for COVID-19 and filled out form 8915 for the federal portion in turbotax. I took a 1/3 approach on how to spread the taxes.

Do I need to fill out something for California state tax? Where would that be and what form would I need to fill out for state

[DanaB27]

California follows the federal rules in regards of  the 10% penalty and the 3 year split when receiving a COVID retirement distribution. 

[Edited 3/31/2021 | 10:58am PST]

@turbota888 

[turbota888]

Can you confirm if California also follows the federal rules of allowing the distribution to be split over 3 years?

I couldn't find anything in writing specifying this, so just wanted to make sure.

[DanaB27]

California follows the the 10% penalty waiver and allows the distribution to be split over 3 years.

Edit [3/31/2021 | 10:58am PST]

[airforcenine]

Im not understanding what I need to add as an addition or subtraction for California

If, for example, I withdrew 30K, do I put $30K as an addition this year and $30K as a subtraction next year?

[DanaB27]

If you withdrew $30,000 and split it over 3 years on the federal return ($10,000 is included in your federal income each year), then your CA state return will follow the federal rule. You do not need to make any adjustments.

[Edited 4/13/2022 | 4:00am PST]

[turbota888]

Does California allow tax to be split over 3 years for 401k early distribution under the CARES act?  Or does 100% of the tax need to be paid in the 2020 return?

[DanaB27]

 California follows only the the 10% penalty waiver and allows the distribution to be split over 3 years. 

@turbota888

[Edited 3/31/2021 | 10:58am PST]

[airforcenine]

Does following these steps achieve that goal? Of paying the CA state taxes on 100% of the distribution or is there a different portion/form that achieves that

[DanaB27]

Yes, making the adjustment on the "Any Pension or Annuity Adjustments?" screen during the CA state interview will achieve that 100% of the COVID distribution is taxed in 2020 on the CA state return.

@airforcenine 

[turbota888]

I submitted my CA state return incorrectly. I didn't know I had to add the 2/3 deferred portion back for the state return. What can I do to fix this?

[DanaB27]

You will need to amend you state return after it has been processed to correct it. Please see I need to amend my state return.

@turbota888 

[ung29378]

It's my understanding that California allows to spread distribution over 3 years just like IRS. I chatted with FTB representative today and she confirmed it! So how are doing this in Turbo Tax correctly?

[DanaB27]

Yes, you are correct. At the beginning California did not provide a specific statement that they follow the 3 year split but more information has been released since then.

TurboTax will automatically carry it from the federal return.

@ ung29378

[airforcenine]

So those of us who have waited,

How do we correctly file our state tax return to only account for 1/3rd the tax this year?