Open TurboTax

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
Announcements
Your taxes, your way. Get expert help or do it yourself. >> Get started
Close icon
Do you have a TurboTax Online account?

We'll help you get started or pick up where you left off.

cancel
Showing results for 
Search instead for 
Did you mean: 
jmam34
New Member

I (25M) took a 2017 Disaster Distribution in 2018. Is it mandatory that the distribution be repaid to an eligible retirement account in the future to avoid 10% penalty?

I am 25 years old.

I took a 2017 Disaster Distribution from a Traditional 401(k) account in 2018 due to hardship due to Hurricane Irma.

Do I need to repay it back (i.e. is it mandatory to be repaid) to an eligible retirement account in the future in order to avoid the 10% penalty?

I understand that I have a choice to make a repayment if I choose, but I am choosing not to make a repayment, and therefore, will there be any unfavorable tax repercussions due to that (e.g. paying any penalties?)

In other words, the literature in the Form 8915B instructions states that the tax-payer has a choice to make a repayment but does not clearly state that the tax-payer has a choice not to make a repayment.

1 Reply
dmertz
Level 15

I (25M) took a 2017 Disaster Distribution in 2018. Is it mandatory that the distribution be repaid to an eligible retirement account in the future to avoid 10% penalty?

Repayment is not necessary to avoid the early-distribution penalty.  Simply qualifying as a disaster distribution eliminates the penalty.  If you don't repay it, it is subject to ordinary income tax even though it is not subject to penalty.

General "hardship" does not qualify the distribution as a disaster distribution.  Provided that your main home was in the qualified disaster area for Hurricane Irma, for this distribution to be a qualified disaster distribution you had to have suffered as a result of Hurricane Irma an economic loss due to loss or damage to real or personal property, loss related to displacement from your home, or loss of livelihood due to temporary or permanent layoffs.  Perhaps one of these is what you meant by "hardship."

About Community

Learn about taxes, budgeting, saving, borrowing, reducing debt, investing, and planning for retirement.

3.48m
Members

2.61m
Discussions

Manage cookies
v