I did an early withdrawal from my 401k plan due to covid but Turbo Tax is still assessing the early penalty of 10% I thought that is waived due to CARES act

[DoninGA]

Coronavirus-Related Distributions will be reported on the new IRS Form 8915-E, Qualified 2020 Disaster Retirement Plan Distributions and Repayments (Use for Coronavirus-Related Distributions).

The IRS has not yet finalized the Form 8915-E or the Form 8915-E instructions.

There is currently no date from the IRS for when this form will be available.

[Spiffy4Jiffy]

So what happens now that we are filing our 2020 taxes...do we have to pay the early withdrawal fee of 10% even though we were told that it would be waived due to COVID? 

[DawnC]

No, the penalty has been waived for 2020.  But the forms have not been finalized yet.  Check back later; the program is being updated daily.  The IRS does not start accepting e-filed returns until Feb 12th, so no need to rush to file before that.  

The 10 percent early withdrawal penalty may be waived on up to $100K of retirement funds withdrawn if you are a qualified individual impacted by Coronavirus. You are a qualified individual if:

• You, your spouse, or dependent are diagnosed with Coronavirus
• You experience adverse financial consequences as a result of being quarantined, furloughed, or laid off
• You had hours reduced due to Coronavirus
• You are unable to work due to your child care closing or reducing hours

@Spiffy4Jiffy

[BillHall]

So, once the IRS has this form completed to take care of the exemptions for early withdrawal, will it auto calculate or auto remove the fees via Turbotax?  I was completing my taxes today and it said to return to that area later when it's all finalized, but how will we know when that is? Thanks!

[SamS1]

Once the form 8915-E is ready, you will indicate you had a Cares Act withdrawal in the Uncommon Situations screen directly after you enter your 1099R distribution information.  The Pandemic is being treated as a natural disaster, similar to Hurricane or Tornado relief in the past.  The other forms in the 8915 series are scheduled to be available 2/18.  I would check back around that time.

Here is link to the Forms Availability list for TurboTax.

[BillHall]

Ok, great!  So, I'd just go in and edit my info for my 1099-R (that i've already entered) and that uncommon situations option will be there?  I appreciate the quick response!

[freekie]

The 8915-E form isn't listed in that Link you gave.  ??

[DawnC]

It will be once the IRS finalizes the form.  If you took a distribution from a retirement account due to corona virus related issues, you will be able to waive the penalty and spread the ordinary tax over tax years 2020-2022.  However, the forms have not been finalized by the IRS yet, so TurboTax has not been updated.  Once the forms are final (no date determined by IRS yet), you will see the options to apply the tax relief provisions on Form 8915-E.   The IRS does not start accepting returns until Feb 12th, so check back then to see what the status is.  

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
• You had work hours reduced to COVID-19
• You’re unable to work due to child care closure or hour reduction

The distribution would be taxed over 2020, 2021, and 2022. 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.

As things change, TurboTax is continually updated and able to handle every situation that arises to ensure your taxes are done right, so you’ll receive your maximum refund.  @freekie

[gospel2537]

Can you claim this on next years return. If the form is not ready in time this year. Since you have 3 years to pay back or spread the tax payment out

[SamS1]

Nope.  Since you took the distribution n 2020, you will need to report the income in 2020.  The form 8915-E will be ready this filing season.  Click here to get on the mailing listing when the form is live in TurboTax.

[BillHall]

I knew we had to claim it this year, but it gives the option to split it between 3 years.  I'm guessing splitting it is also part of that form we're waiting on? Since I didn't see that anywhere else in the turbotax forms when I started my taxes.  I will probably just do it all at once, so I don't forget next year, but for anyone reading, it's nice to know.  Thanks!! 

Bill

[SamS1]

Yes...the 8915-E will deal with early distributions from retirement plans exclusions like the 10% early withdrawal penalty and the 3 year spread of the income.  If you decide to spread the income, TurboTax will ask you next year if you took a distribution due to the 2020 Pandemic.  It can also be a good planning tool if the total distribution this year is pushing you into a higher marginal tax bracket, splitting it into 3 year may lower the total amount of tax you end up paying on the distribution.  This was the intent by offering the 3 year spread.

[BillHall]

Awesome!  I appreciate the quick response!  It is probably smarter to spread it out then.  If turbotax will ask, then I guess that takes out the worry of forgetting.  Thank you!

Bill

[PattiF]

The form is not available from the IRS yet. 

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.