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Level 2
posted Mar 1, 2021 10:22:31 AM

I took a COVID-19 distribution from my 401(k). The admin sent me two different 1099-Rs for partial amounts. TurboTax is only letting me say one is for COVID-19. Why?

I took a distribution from my 401(k) due to COVID-19 hardship. As an example, the total amount was $50,000. The 401(k) administrator sent me two different 1099-Rs: One for $40,000 and one for $10,000. I entered both 1099-Rs into TurboTax, but it asked me about COVID-19 only on the $40k 1099-R. It did not ask me about COVID-19 on the $10k 1099-R. It is not letting me defer taxes and eliminate the penalty for the second 1099-R.

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1 Best answer
Expert Alumni
Mar 1, 2021 10:42:57 AM

Was the code in Box 7 1B? If yes, then please follow these workaround steps as discussed in 1099R Coronavirus Exception Issue: 

  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 enter all 1099-R information, enter code "1" but do not enter code "B" in box 7
  4. 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)"
  6. Answer all questions in regards to the COVID distribution to trigger that you qualify for the Qualified Disaster Retirement treatment.
  7.  On the “Review your 1099-R info” screen click "edit" and add code "B" to the 1099-R Form entry.
  8. When you continue the COVID questions are still accessible

 

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.

 

 

TurboTax Desktop does not have this issue. Please see How do I switch from TurboTax Online to the TurboTax software? for additional information.

3 Replies
Expert Alumni
Mar 1, 2021 10:42:57 AM

Was the code in Box 7 1B? If yes, then please follow these workaround steps as discussed in 1099R Coronavirus Exception Issue: 

  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 enter all 1099-R information, enter code "1" but do not enter code "B" in box 7
  4. 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)"
  6. Answer all questions in regards to the COVID distribution to trigger that you qualify for the Qualified Disaster Retirement treatment.
  7.  On the “Review your 1099-R info” screen click "edit" and add code "B" to the 1099-R Form entry.
  8. When you continue the COVID questions are still accessible

 

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.

 

 

TurboTax Desktop does not have this issue. Please see How do I switch from TurboTax Online to the TurboTax software? for additional information.

Level 2
Mar 1, 2021 10:50:03 AM

Thank you, this workaround worked perfectly. Looks like a bug. Any idea if they know about it and/or are fixing it?

Expert Alumni
Mar 1, 2021 1:32:51 PM

It is a known issue, but no scheduled date for an update.......yet.