COVID 19 CARES Act 401K Distribution

[Michelle1005]

I notice when you split the taxes over 3 years that the total amount is still showing added to your total income? If this is the case then will it also show the next two years as income? That cannot be right because you would be claiming thee same distribution as income 3 years?

[macuser_22]

It will show as income on the summary screen which shows gross income, not taxable income.

The IRS requires reporting all income on a *income* tax return - taxable and not-taxable.

The taxable amount will go on the 1040 line 4b or 5b.

[Michelle1005]

But  will this affect my tax bracket each year because it is showing all 3 years under gross income? I know it affected the stimulus by disqualifying us and we were unable to get the break in taxes on the unemployment benefits. With higher gross income each year comes with elimination of certain credits so will we be penalized all 3 years on the gross income? So this full amount of income will show all 3 years?

[macuser_22]

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@Michelle1005 wrote:

But  will this affect my tax bracket each year because it is showing all 3 years under gross income? I know it affected the stimulus by disqualifying us and we were unable to get the break in taxes on the unemployment benefits. With higher gross income each year comes with elimination of certain credits so will we be penalized all 3 years on the gross income? So this full amount of income will show all 3 years?

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No the TurboTax income summary is just for your information.  Only the amount on the 1040 line 4b or 5b is added to your AGI.    If you choose to spread the tax over 3 years then that amount should be 1/3 of the distribution amount on line 4a or 5a.     If that puts your AGI over $140,000 then you do not qualify for the unemployment $10,200 exemption.    

[Caseyblue]

Can 1/3 Repayment be made after filing return but before filing due date?

[macuser_22]

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@Caseyblue wrote:

Can 1/3 Repayment be made after filing return but before filing due date?

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Nothing you repay now will affect the 2020 tax, but will apply to the remaining 2021 and 2022 tax if you spread the tax over 3 years.     Any 2020 repayment had to be repaid in 2020.

[Caseyblue]

I do not believe that is correct. My understanding is repayment could be made before 2020 filing deadline

[macuser_22]

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@Caseyblue wrote:

I do not believe that is correct. My understanding is repayment could be made before 2020 filing deadline

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I think I misunderstood the question. 

The repayment can be anytime within 3 years of the distribution.     But if you already filed and paid the tax for the current year, you would have to amend the year that you paid the tax to receive the credit for it.

[Caseyblue]

My hope was to file 2020 return now reflecting 1/3 repayment to original 401k & make the actual 1/3 repayment l just prior to May 17 filing deadline. 

Hope that is OK

[macuser_22]

There are new report of this every day.  Only a user that is having the problem can submit a diagnostic file but an agent must ask them to - some have and some of these threads have tokens in them. 

Even the "EXPERTS" are telling them to add $0.01 to the box one amount on one 1099-R and resubmit.