Withdrawals from a IRA because you were affected by COVID-19 are not subject to the 10% early withdrawal penalty. Additionally, the tax on the distribution can be paid over a three year period. You’ll have that time to pay back the funds you withdrew, without the amount impacting that year’s cap on contributions, and if you pay back the amount within that time, you’ll be able to claim a refund on those taxes.
In order to waive the penalty and elect to the option to pay the tax over three years, you will have to complete Form 8915-E, which has not been released by the IRS yet. The IRS has not yet released the final version of the form yet, so please sign up here for the most up to date information on Form 8915-E once it becomes available.
Thanks. I've been waiting too because unfortunately I had to withdraw money and as it stands now I would take a big hit on my taxes if I just file and take the 10% because I really need the money!
The 8915-E Form is projected to be e-fileable starting 02/24/2021, unfortunately. As of today 2/15/2021, IRS just recently completed its final development of the 2020 version of this form. Please click on the following link and sign up for an email notification when it's fixed.
The forms are available if you are going to download from the IRS website. However, e-filing is different. Once the form is finalized by the IRS, it has to be coded into the special language the software uses and has to be thoroughly tested for calculations and e-filing acceptability. IRS then has to approve it for e-file. It always takes a little longer for a form to become available for e-file in a software program. I hope this helps you understand the situation. Thank You for your patience.
If you are under age 59 1/2, the distribution from the retirement plans and IRAs is considered as an early withdrawal. Generally, you will pay both regular tax plus an additional 10% penalty of your entire distribution unless you met certain criteria. Due to the CARES Act, if your retirement distribution is related the Covid-19, you will not be liable for this additional penalty. You will still pay the normal taxes like your wages and income. For more information from the IRS, click here: Covid Relief. If your distribution is not related to the Covid, you will need to pay the penalty.