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b-r2017taxes
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I took a covid loan from a retirement acct, I paid the Federal taxes when I filed my 2020 taxes. I paid the money back in April of 21. Did I have to pay Federal taxes?

under the Cares act
4 Replies
DanPaul02
Level 7

I took a covid loan from a retirement acct, I paid the Federal taxes when I filed my 2020 taxes. I paid the money back in April of 21. Did I have to pay Federal taxes?

You would be taxed on 1/3 of the loan for 2020 taxes and will pay taxes on another 1/3 for Jan until Apr 2021,   Hopefully 2021 TurboTax will make that easy.  If you paid taxes on the entire amount in 2020, then you will have part of that returned with the 2021 return.

 

COVID loan

Critter-3
Level 15

I took a covid loan from a retirement acct, I paid the Federal taxes when I filed my 2020 taxes. I paid the money back in April of 21. Did I have to pay Federal taxes?

Since the withholding was all in 2020 then you can amend the 2020 return to get some of the taxes now and not have to wait.  

 

Q6. When do I have to pay taxes on coronavirus-related distributions?

A6. The distributions generally are included in income ratably over a three-year period, starting with the year in which you receive your distribution. For example, if you receive a $9,000 coronavirus-related distribution in 2020, you would report $3,000 in income on your federal income tax return for each of 2020, 2021, and 2022. However, you have the option of including the entire distribution in your income for the year of the distribution.

Q7. May I repay a coronavirus-related distribution?

A7. In general, yes, you may repay all or part of the amount of a coronavirus-related distribution to an eligible retirement plan, provided that you complete the repayment within three years after the date that the distribution was received. If you repay a coronavirus-related distribution, the distribution will be treated as though it were repaid in a direct trustee-to-trustee transfer so that you do not owe federal income tax on the distribution.

 

If, for example, you receive a coronavirus-related distribution in 2020, you choose to include the distribution amount in income over a 3-year period (2020, 2021, and 2022), and you choose to repay the full amount to an eligible retirement plan in 2022, you may file amended federal income tax returns for 2020 and 2021 to claim a refund of the tax attributable to the amount of the distribution that you included in income for those years, and you will not be required to include any amount in income in 2022. See sections 4.D, 4.E, and 4.F of Notice 2005-92 for additional examples.

 

https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-...

Opus 17
Level 15

I took a covid loan from a retirement acct, I paid the Federal taxes when I filed my 2020 taxes. I paid the money back in April of 21. Did I have to pay Federal taxes?

Since you repaid the money in 2021, you don't owe the taxes.

 

You could have delayed filing your 2020 return so that you could report the repayment.  Since you did file a 2020 return and pay the taxes, you will need to file an amended 2020 return to report the repayment and get the taxes back. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Opus 17
Level 15

I took a covid loan from a retirement acct, I paid the Federal taxes when I filed my 2020 taxes. I paid the money back in April of 21. Did I have to pay Federal taxes?

Wait one sec, "loan?"

 

Most retirement plans don't allow loans.  If you mean loan informally, as in "I withdrew money planning to pay myself back" that's fine, it's just a confusing use of the word "loan."

 

If this was a formal loan from a retirement plan that allows loans (401k, 403b, possibly others) the rules might be different.  You should not have paid any tax on a real loan as long as you had not defaulted on the payments.  If you had a formal loan, we may need more information.  

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

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