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The Coronavirus-related relief measures for retirement plan distributions have to be reported on form 8915-E which has not yet been finalized by the IRS. No date has been given by the IRS for the finalization of this document.
TurboTax will update this section after the IRS releases the final version of form 8915-E and its instructions. Please revisit this section at a later date.
How do I handle a repayment in Turbo Tax?
It depends. You have misinterpreted the provision. The IRS will give you an option to pay the tax on the distribution over a three-year period. You will pay 1/3 this year, 1/3 the next, and 1/3 in the final third year. Here is how to report.
Note: In the 6th step Turbo Tax asks if you wish to pay ALL the tax this year. Make sure that box is not checked.
What if I want to repay half this year and half next year? How is the tax handled?
No. You do not have that option unfortunately. You must either take the three-year option or pay the entire amount this year.
Can I repay differing amounts in each of the 3 years?
If so, would it be better be to repay more $ in the year which I expect to have a higher or lower income?
Yes, you can pay different amounts, and it would be better to repay more money in the year in which you expect to have a higher income.
@Caseyblue
How is the repayment handled/reported within Turbo Tax ?
Is the reporting different if I make repayment prior to filing as opposed to after ?
@Caseyblue After your enter your 1099-R, and indicate it was a covid-related distribution, TurboTax will ask if you repaid all or part of your distribution. Enter the amount you repaid (screenshot).
The balance of the distribution can be reported over three years. Continue until you get a screen with a checkbox asking 'if you want to pay tax this year' and DON'T check the box (screenshot).
Click this link for more info on 2020 Stimulus Tax Relief.
Is the reporting handled differently if I make repayment prior to filing as opposed to after filing ?
No the reporting is handled the same. Basically, you are being asked if you want to pay now or pay later. if you pay the full income tax on the full distribution this year, you won't need to worry about paying it later. You might want to consider this option if you predict your income may drop over the next 2 years.
instead, you can pay tax and declare 1/3 of the income this year, 1/3 next year, and then the final 1/3 in two years. As I said, pay now or pay later.
Same would also be true if I paid 1/2 this year and 1/2 next ?
you can't choose your tax due.
You must pay the amount calculated on your tax return.
For a covid distribution, you only have the two choices 100% or one third over three years.
If you repaid more that 1/3, ie 1/2 then
1/2 - 1/3 is carried over to next year.
according to my fractions in fourth grade that would be 3/6 minus 2/6 = 1/6 credited to your next tax return.
Not looking to choose the tax due.
Looking to repay more $ in a year with higher income.
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