I took a coronavirus distribution...

[ashleymarie0731]

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?

[MaryM428 · Accepted solution]

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   

[lindamisuna]

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]

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:

1. Login to your TurboTax Account 
2. Click on the Search box on the top and type “1099-R”
3. Click on “Jump to 1099-R” and you should see the “Your 1099-R Entries” screen
4. Click "edit" and continue until "Tell us if any of these uncommon situations apply" screen
5. 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 

[ashleymarie0731]

Thank you so much! That clears it up for me

[FZ267]

So does this mean now that TurboTax is handling the Covid withdrawal correctly? I didn’t see any where that I could claim the income over three years in pay the taxes over three years.

[JamesG1]

When you claim a qualified COVID-19 disaster during the interview for your 1099-R, TurboTax states:

• You will need to revisit this area.  The IRS instructions related to disaster distributions were not ready in time for us to include them in this release.  Please revisit this area later.

IRS form 8915-E has not been completed as you can see here.

As of this date, there is not a date for completion because the IRS has not completed IRS form 8915-E. 

Forms availability can be found here and will report a tentative date when the form will be available in TurboTax.

[Yiverson]

Its now Feb 13th and the IRS is accepting returns. When is Turbo Tax going to get the finalized Form 8915 -E so we can file? If people are filing it makes sense that this form is now complete.

[DoninGA]

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@Yiverson wrote:

Its now Feb 13th and the IRS is accepting returns. When is Turbo Tax going to get the finalized Form 8915 -E so we can file? If people are filing it makes sense that this form is now complete.

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The Form 8915-E will be available for e-filing using TurboTax on 02/24/2021

[Yiverson]

Thanks!

[ashleymarie0731]

It let me complete and file my taxes. It never said I had to revisit that area. 

[daleadams1]

I just started my federal return today on Turbotax and the system advised me to revisit that area.  I suspect you will need to file an amended return.  Turbotax may help you with that since it seems the system didn't warn you.

[Yiverson]

one of the experts told me that turbo tax will have this all set on 2/24

[Anonymous]

@Yiverson   The IRS still hasn't released this form, so TurboTax can't yet provide it.  It is not uncommon at all for the IRS to still be working on forms after filing season opens.  Just because they have started accepting some returns doesn't mean they can accept them all.  Those people who are affected by items not finalized by the start of the filing system have to wait.  

[DaveF1006]

At this point and time the Form 8915-E (Qualified 2020 Disaster Retirement
Plan Distributions and Repayments (Use for Coronavirus-Related Distributions)) is not finalized.

The 8915-E Form is projected to be e-fileable starting 02/24/2021

Please sign-up here and we will email you once the form is live.