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turbota888
Level 2

Early withdraw of 401K due to COVID-19, where to enter on TT and what forms are required, what are the tax impacts, can this be spread across 3 years if so, how?

Just recently withdrew funds from my 401K account before my retirement age due to COVID. What proof do I need to show to the IRS if any for COVID related reasons? How do I spread the penalty across 3 years? How do I recognize the income, all in 2020? or spread throughout? What happens when I pay it back how do I record it after my 2020 tax return?
5 Replies
MinhT1
Employee Tax Expert

Early withdraw of 401K due to COVID-19, where to enter on TT and what forms are required, what are the tax impacts, can this be spread across 3 years if so, how?

If you are affected by Covid-19, you can withdraw up to $100,000 from your 401(k) account without incurring the early withdrawal penalty and you can spread the taxation of the withdrawal over 3 years.

 

However, the Coronavirus-related relief measures for retirement plan distributions have to be reported on form 8915-E which has not yet been finalized by the IRS. No date has been given by the IRS for the finalization of this document.

 

TurboTax will update this section after the IRS releases the final version of form 8915-E and its instructions. Please revisit this section at a later date.

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turbota888
Level 2

Early withdraw of 401K due to COVID-19, where to enter on TT and what forms are required, what are the tax impacts, can this be spread across 3 years if so, how?

Is there a way to estimate the taxes I would have to pay given that I had to withdraw early from my 401K?

PattiF
Employee Tax Expert

Early withdraw of 401K due to COVID-19, where to enter on TT and what forms are required, what are the tax impacts, can this be spread across 3 years if so, how?

The CARES Act allows for withdrawals from a 401k to not be assessed with the additional 10% penalty for early withdrawal if under the age of 59 1/2. The payments can be spread over a three year period so that the impact of the additional income will not be felt in one year. This will be taxed as ordinary income at the tax rate for your AGI. The 401k funds can also be repaid over a three year period.

 

At this point in time the Form 8915-E (Qualified 2020 Disaster Retirement Plan Distributions and Repayments (Use for Coronavirus-Related Distributions)) is not finalized. We currently do not have an estimated date when the form is ready.

 

Please sign-up here and we will email you once the form is live.

beyond626
New Member

Early withdraw of 401K due to COVID-19, where to enter on TT and what forms are required, what are the tax impacts, can this be spread across 3 years if so, how?

Is there any update on when this will be added to TurboTax? I see that the irs has the form posted as of Feb 8th.

CatinaT1
Employee Tax Expert

Early withdraw of 401K due to COVID-19, where to enter on TT and what forms are required, what are the tax impacts, can this be spread across 3 years if so, how?

On February 11th, the IRS finalized the Form 8915-E for retirement plan distributions under the CARES act.  The form will be available on TurboTax for efile approximately February 25th (end of day). 

  

 Please sign-up here and we will email you once the form is live.

 

In the mean time, you can make sure you are eligible for the provision here - Coronavirus Relief

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