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
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]
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.
California follows the the 10% penalty waiver and allows the distribution to be split over 3 years.
Edit [3/31/2021 | 10:58am PST]
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?
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]
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?
California follows only the the 10% penalty waiver and allows the distribution to be split over 3 years.
[Edited 3/31/2021 | 10:58am PST]
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
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.
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?
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.
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?
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
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?
If you selected on the federal return to split the amount over 3 years it will automatically carry over your California state return.
When will Turbo Tax will automatically carry it over for California? I am ready to file but I am not willing to do so until I know Turbo Tax has it done correctly for me. The confusing is on the California Tax in Turbo Tax under Pension and Annuity Adjustment.
Just to confirm, since Turbo Tax automatically carried over Federal information and applied to California for splitting the distribution into 3 years equally, we don't need to complete the Section Pension and Annuity Adjustments for California tax filing. Is this correct? Please confirm. Thank you
Yes, TurboTax does this automatically and you do not need to make any adjustments.
You can verify this by looking at the State Summary:
So if I took $24,000 from my retirement under the COVID provisions and on my federal I split it over 3 years, so $8,000 each year then CA is the same? I leave the adjustments window blank and this year and the next 2 years the $8,000 will automatically flow over from when I fill out my federal taxes?
I just don’t want to do this wrong. Thanks.
Yes, CA follows the federal treatment. If you split it for 3 years on the federal $8,000 per year, then it will get carried on the CA state return.
Do you mind clarifying this? Why would I add $20,000 as an addition in 2020 and then $10,000 as a subtraction each year for 2021 & 2022? Couldn't I just add $10,000 as an addition in 2020, 2021, and 2022 since I am spreading the $30k over 3 years and CA follows the Federal rule here? Thanks in advance. I'm really stuck on this.
This doesn't apply anymore. TurboTax will automatically pull your federal information into the CA state return and report 1/3 of the distribution.
In the beginning, the language on the CA website was unclear and it seemed that they would not allow to spread the distribution, therefore there were adjustments needed. But then CA updated their information and followed the federal rules.
I'm really struggling with this portion because TT has not added the 1/3 distribution to my 2021 income and just keeps putting me in a loop of needing to revisit the retirement portion of federal wages and income.
I really need help on what to do. We elected to do the 3 year reporting ($33,000 per year) for the 401k distribution my husband took in 2020. We obviously didn't get a 1099-R this year, but TT keeps bringing me back to that section.