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dacounihan
New Member

Do we have to show our positive covid test results when we do our taxes thru TurboTax if we withdraw $$ from our IRA? How does this work so we are not penalized?

 
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dmertz
Level 15

Do we have to show our positive covid test results when we do our taxes thru TurboTax if we withdraw $$ from our IRA? How does this work so we are not penalized?

To claim that an IRA distribution is a Coronavirus-Related Distribution, you include Form 8915-E as part of your tax return, showing the amount that you are claiming as a CRD.  By signing your tax return you are attesting that your tax return is correct to the best of your knowledge, which in this case means that you are claiming that you meet the requirements for being an affected individual.  If the IRS has reason to question your assertion, they will ask for supporting documentation, otherwise Form 8915-E is all that is needed.  This is the same as with any other types of disaster distributions reported on the various other Forms 8915

 

Filing Form 8915-E when you know that you do not meet the definition of a qualified individual is fraudulent and is tax evasion.

 

TurboTax has yet to implement Form 8915-E, which TurboTax will eventually prepare as you proceed through entry of the Form 1099-R reporting the distribution and TurboTax asks if the distribution was a CRD.  See the draft instructions for Form 8915-E here to get an idea of what TurboTax will be implementing:  https://www.irs.gov/pub/irs-dft/i8915e--dft.pdf

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7 Replies
DoninGA
Level 15

Do we have to show our positive covid test results when we do our taxes thru TurboTax if we withdraw $$ from our IRA? How does this work so we are not penalized?

The IRS has not yet finalized the CARES section of a federal tax return concerning a withdrawal from a retirement account due to Covid 19

VolvoGirl
Level 15

Do we have to show our positive covid test results when we do our taxes thru TurboTax if we withdraw $$ from our IRA? How does this work so we are not penalized?

I imagine after you enter the 1099R for an early Distribution it will ask if you have any exceptions to the penalty.  It will still be taxable but no 10% Early Withdrawal Penalty.

dacounihan
New Member

Do we have to show our positive covid test results when we do our taxes thru TurboTax if we withdraw $$ from our IRA? How does this work so we are not penalized?

Any idea when that will be ? 

xmasbaby0
Level 15

Do we have to show our positive covid test results when we do our taxes thru TurboTax if we withdraw $$ from our IRA? How does this work so we are not penalized?

The IRS is drafting new 1099R forms.  Then the software has to be programmed for them, and the IRS has to test and approve of the software.  It is a complex process because of the all the CARES changes.  It could even be a couple of months—sometime in January or even February.  Meanwhile if you are trying to plan, if you have 2019 desktop  (CD/download software) for 2019 use the what if feature- in Forms mode-but it will not have that CARES stuff.

 

You can also try using the Taxcaster tool:

https://turbotax.intuit.com/tax-tools/calculators/taxcaster/

 

There are a number of 2020 forms that are still being revised by the IRS.  Click on the REVIEW tab to see what form(s) you are waiting for and when it is estimated to be ready (when operational ….and dates are subject to change) ... 

 

IRS Forms Availability Table for TurboTax Individual (Personal) Tax Products

·         

State Forms Availability Table for TurboTax Individual (Personal) Tax Products

**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**
dmertz
Level 15

Do we have to show our positive covid test results when we do our taxes thru TurboTax if we withdraw $$ from our IRA? How does this work so we are not penalized?

To claim that an IRA distribution is a Coronavirus-Related Distribution, you include Form 8915-E as part of your tax return, showing the amount that you are claiming as a CRD.  By signing your tax return you are attesting that your tax return is correct to the best of your knowledge, which in this case means that you are claiming that you meet the requirements for being an affected individual.  If the IRS has reason to question your assertion, they will ask for supporting documentation, otherwise Form 8915-E is all that is needed.  This is the same as with any other types of disaster distributions reported on the various other Forms 8915

 

Filing Form 8915-E when you know that you do not meet the definition of a qualified individual is fraudulent and is tax evasion.

 

TurboTax has yet to implement Form 8915-E, which TurboTax will eventually prepare as you proceed through entry of the Form 1099-R reporting the distribution and TurboTax asks if the distribution was a CRD.  See the draft instructions for Form 8915-E here to get an idea of what TurboTax will be implementing:  https://www.irs.gov/pub/irs-dft/i8915e--dft.pdf

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Opus 17
Level 15

Do we have to show our positive covid test results when we do our taxes thru TurboTax if we withdraw $$ from our IRA? How does this work so we are not penalized?

Like almost everything else, you don't send proof with your tax return.  Your ink or electronic signature declares that your return is truthful under penalty of perjury.  But, keep the proof with your other records for at least 3 years after you file, and 6 years is better, in case the IRS asks to see it. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
dmertz
Level 15

Do we have to show our positive covid test results when we do our taxes thru TurboTax if we withdraw $$ from our IRA? How does this work so we are not penalized?

Given that the IRS disallowing a distribution to be treated as a CRD can potentially result in a substantial underreporting of tax liability for 2020, I would suggest keeping the supporting documentation no less than 6 years because the statute of limitations for the IRS to challenge a significant underreporting of tax liability is 6 years rather than 3 years.  Further, if the IRS deems the reporting to be fraudulent, there is no statute of limitations.  If either you or your spouse was diagnosed with COVID-19, presumably you would want to keep the medical record of that forever anyway.

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