Form 8915-E and Early 401K Early Withdrawal Penalty

[wchengkanhi]

My understanding is that Turbox Tax just updated the 8915-E form and instructions.  I have installed the latest update this morning but I still see myself paying the 10% early withdrawal penalty for my 401-k withdrawal in 2020.  I thought IRS waived the early withdrawal penalty if I was being laid off.  Please advise, thank you.

[DanaB27]

Yes, those who qualify as individuals directly impacted by the pandemic will be able to withdraw up to $100k from their retirement accounts without facing the 10% early withdrawal penalty.

You qualify if:

• You, your spouse, or your dependent are diagnosed with COVID-19
• You experience adverse financial consequences as a result of being quarantined, furloughed, or laid off or having work hours reduced because of COVID-19
• You’re unable to work due to child care closure or hour reduction because of Covid-19
• You experience adverse financial consequences as a result of closing or reducing hours of a business that you own or operate due to SARS-CoV-2 or COVID-19.

 Please follow these instructions:

1. Open your return
2. Click on "Search" on the top right and type “1099-R”
3. Click on “Jump to 1099-R” and enter your 1099-R (if you started this before you should see the “Your 1099-R Entries” screen and will click "edit")
4. Continue until "Was this withdrawal due to COVID-19 or a Qualified Disaster Distribution? " screen
5. Make the appropriate selection and continue through the questions. 

You can choose to have the distribution taxed over 2020, 2021, and 2022 instead of only in 2020. You’ll have three years to pay back the funds you withdrew, without the amount impacting that year’s cap on contributions. If you pay back the amount within that time, you’ll be able to claim a refund on those taxes paid when you file an amended tax return. Please see IRS Coronavirus-related relief for retirement plans and IRAs for more details.

[wchengkanhi]

Thank you for your response.  I just don't see the question that you were referring to.  I tried to delete my 1099-R and redo it again and TurboTax still subject me to the the 10% early withdrawal penalty.  Please advise, thank you.

[DanaB27]

If you are using TurboTax Online then please follow these instructions:

1. Login to your TurboTax Account 
2. Click on the Search box on the top and type “1099-R”
3. Click on “Jump to 1099-R” and enter your 1099-R (if you started this before you should see the “Your 1099-R Entries” screen and will click "edit")
4. Continue until "Tell us if any of these uncommon situations apply" screen
5. Select "I took out this money because of a qualified disaster (includes COVID-19)"
6. Answer all follow-up questions.