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

[amoresi1]

Free Tax USA already has form 8915-E in their product. I filed my tax return with them over the weekend.

[gospel2537]

Are the forms ready on turbo tax for the covid 19 early with drawal waiver. Is there a date yet if not

[DoninGA]

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@gospel2537 wrote:

Are the forms ready on turbo tax for the covid 19 early with drawal waiver. Is there a date yet if not

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Form 8915-E, Qualified 2020 Disaster Retirement Plan Distributions and Repayments is scheduled to be available in TurboTax on 02/25/2021

[gospel2537]

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

[DoninGA]

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@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

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Form 8915-E, Qualified 2020 Disaster Retirement Plan Distributions and Repayments is scheduled to be available in TurboTax on 02/25/2021

[amoresi1]

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 

[BillHall]

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!

[BillHall]

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!

[Jakestans41]

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