I took a coronavirus distribution...

Forum|Forum|5 years ago
January 30, 2021
1 reply
20 views

I took a coronavirus distribution from my 401K this year because my children’s school was closed down. I was told this income would not be taxable. I was not working during that time. When I filed though, it made me pay tax on it. Is this correct?

Not A Product Question

Best answer by MaryM428

Expert Reviewed

Because you were affected by COVID-19, you were permitted to withdraw up to $100,000 from your 401K without paying an early withdrawal penalty.

The income is still taxable, but the penalty for withdrawing the income before the age of 59-1/2 was waived for distributions made by December 30, 2020.

The taxes on the distribution can be spread out over a three year period. You can also put the money back into your retirement plan within three years and undo the tax consequences by filing an amended tax return.

COVID Tax Relief

MaryM428Answer

Level 11

Expert Reviewed

lindamisuna

Level 2

I entered 100% of the distribution expecting to be asked if this was a coronavirus distribution, but I didn't see any reference to it. Should I just enter 33.333% of it?

DanaB27

Level 15

Form 8915 -E, that reports the Coronavirus-related relief measures for retirement plan distributions, is not yet finalized by the IRS. TurboTax will update this section after the IRS releases the final version of Form 8915-E and then you can finish your distribution information.

Please follow these steps to enter your 1099-R:

Login to your TurboTax Account
Click on the Search box on the top and type “1099-R”
Click on “Jump to 1099-R” and you should see the “Your 1099-R Entries” screen
Click "edit" and continue until "Tell us if any of these uncommon situations apply" screen
Select "I took out this money because of a qualified disaster (includes COVID-19)" (TurboTax will walk you through questions once this section is ready)

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 or having work hours reduced because of COVID-19
You’re unable to work due to child care closure or hour reduction because of Covid-19
You experience adverse financial consequences as a result of closing or reducing hours of a business that you own or operate due to SARS-CoV-2 or COVID-19.

You can choose to have the distribution taxed over 2020, 2021, and 2022 instead of only in 2020. You’ll have three years to pay back the funds you withdrew, without the amount impacting that year’s cap on contributions. If you pay back the amount within that time, you’ll be able to claim a refund on those taxes paid when you file an amended tax return. Please see IRS Coronavirus-related relief for retirement plans and IRAs for more details.

@lindamisuna

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