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.
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?
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The 10 percent early withdrawal penalty may be waived on up to $100K of retirement funds withdrawn if you are a qualified individual impacted by Coronavirus.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:
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!
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.
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!
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:
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
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
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.
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
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.
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
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.
Free Tax USA already has form 8915-E in their product. I filed my tax return with them over the weekend.
Are the forms ready on turbo tax for the covid 19 early with drawal waiver. Is there a date yet if not
@gospel2537 wrote:
Are the forms ready on turbo tax for the covid 19 early with drawal waiver. Is there a date yet if not
Form 8915-E, Qualified 2020 Disaster Retirement Plan Distributions and Repayments is scheduled to be available in TurboTax on 02/25/2021
I was told by my 401k company you have the option to pay it back within 3 years and you dont have to pay taxes if you do how is the irs handling this and also is the form for the early penalty waiver ready yet on turbo tax
@gospel2537 wrote:
I was told by my 401k company you have the option to pay it back within 3 years and you dont have to pay taxes if you do how is the irs handling this and also is the form for the early penalty waiver ready yet on turbo tax
Form 8915-E, Qualified 2020 Disaster Retirement Plan Distributions and Repayments is scheduled to be available in TurboTax on 02/25/2021
You don’t have to pay the 10% early withdrawal penalty. You DO have to pay the income taxes, which you can pay over 3 years or pay all in your 2020 return. What you withdrew from your IRA is counted as income. @gospel2537
So, going back in my tax forms, Turbotax is allowing the early withdrawal info and its calculating correctly... However, when I got done and ready to file, it said my Michigan taxes had a little issue needing resolved. It takes me to a screen showing the Pension Deduction Worksheet. It's got the total of my withdrawal highlighted and it says on the screen that I need to enter the Federal Amount, and it says "We're still working on updates related to retirement distributions that qualify for disaster or COVID relief". It will let me bypass that screen, but it won't let me complete my taxes to Efile unless I fix that screen. But it won't tell me what I need to do.... Is there a glitch in the newly released form(s) for early withdrawal due to covid19?
Thanks in advance!
FYI to anyone who took the early withdrawal. I just paid for and used the live help on TURBOTAX for the above stated issue. When it comes to state taxes (whatever your state is), it made me go to the Pension Deduction Worksheet page and kept saying it needed my Federal Amount... The federal part is already taken care of in the Federal Tax area... so in the state, put 0 in the highlighted box where it asks for "Federal Amount" and then continue. It will take it and you'll be able to complete your taxes. It's a glitch in the system right now and it still works. For whatever reason, turbotax doesn't automatically show you had state taxes pulled when you withdrew your money. IF you didn't, then this is where you'd put your state taxes you need to pay. That's another issue that I didn't have to deal with. I hope that made sense. So, to recap:
If you had federal and state taxes pulled when you withdrew your 401K distribution, turbotax should handle everything properly, aside from the state part. Just enter 0 in the highlighted box and hit continue.
Thanks!
Bill,
I spent 2.5 hours with help both chat and on the phone last Friday. They emailed me Monday saying it was solved, it wasn't.
I was extremely frustrated with the entire process until I read your post. I just wanted to thank you so very much for sharing! I really appreciate the help!
Thank you!
Jake