I took some 401 K money due to covid and they withheld 10% for taxes already before I got payment. Where is form 8915E so I am not taxed again?

[DoninGA]

The taxes withheld from the distribution and shown in box 4 of the Form 1099-R are entered on the Form 1040 Line 25b as a tax payment.  Just like taxes withheld on a W-2 are entered as a tax payment.  If your total tax payments are greater than your total tax liability then you will get a tax refund for the overpayment.

Enter the Form 1099-R as received.  After entering the 1099-R you will be asked a series of questions, several concern the distribution being Covid-19 related.  Answer the questions presented.

The Form 8915-E will be generated and included with your tax return based on the answers you provide in the Form 1099-R section of the program.

Enter 1099-r in the Search box located in the upper right of the program screen. Click on Jump to 1099-R

[DanaB27]

The taxes withheld on Form 1099-R will be credited on line 25b on Form 1040.

Please follow these steps to enter your 1099-R and trigger Form 8915-E:

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 your 1099-R (if you started this before you should see the “Your 1099-R Entries” screen and will click "edit")
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)"

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.

[jewelscrzy]

Thank you!

It's weird though because just to see what would happen I took out the tax withheld amount on 1099 r and my refund went up, I would think it would of gone down since that's less tax I paid?  Since this is through the care act do you know if I should pay 10 or 20% tax on the amount taken.  Thanks and let me know.

[jewelscrzy]

Thank you!

It's weird though because just to see what would happen I took out the tax withheld amount on 1099 r and my refund went up, I would think it would of gone down since that's less tax I paid?  Since this is through the care act do you know if I should pay 10 or 20% tax on the amount taken. 

Also I checked the box to have all the tax taken out in 2020 and my tax refund amount went down.

Then I redid it and did not check the box thinking they would give me option how I wanted to claim the payment over 3 years but it didn't.  All it did when I unmarked that box was make my refund like triple.  Any idea how I can break up the amount over the 3 years they say you can?

Thanks and let me know.

[DanaB27]

The box that you checked gives you the option to include the whole COVID retirement distribution in 2020 instead of spreading it over 3 years. Therefore when you checked it lowered your refund because your taxable income and as a result your tax increased.

If you uncheck it it will split the distribution into 3 parts you can check that on line 5 of Form 1040. The taxes withheld cannot be split the whole amount withheld be credited to 2020.

[jewelscrzy]

Awesome, thanks

So they take out the total tax you paid/owe in 2020 but you can split the amount withdrawn/taken from the 401K in 3 (over 3 years) so  your taxable income amount is not super high in 2020?

[DanaB27]

Yes, the total tax paid will be applied to your 2020 tax return and the income from the distribution can be spread out over 3 years to avoid having a high income.

But keep in mind that you might have to withhold some extra taxes from other sources in 2021 and 2022 because you have the added income in those years but no income tax withheld from the distribution for these years because the tax withheld on Form 1099-R only gets credited to 2020.

Also, if you pay the amount back in the next three years then you can get a refund on any taxes paid. Please see this from the IRS:

"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."

[DBLDAM]

I took out 95,000 for covid but I am also over 65 in 2020 and 67,000 for my wife. I paid the 10% taxes and spread it out over 3 years. This year I see after the got the 8915E available and entered the data my taxes went way up, over 12,000. How can this be if I already paid the early distribution in 2020?

[DoninGA]

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@DBLDAM wrote:

I took out 95,000 for covid but I am also over 65 in 2020 and 67,000 for my wife. I paid the 10% taxes and spread it out over 3 years. This year I see after the got the 8915E available and entered the data my taxes went way up, over 12,000. How can this be if I already paid the early distribution in 2020?

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All the federal income taxes withheld on the distribution in 2020 were entered on the 2020 tax return as a tax payment and included in the 2020 tax refund you received.

The federal taxes withheld are not spread over three years, only the amount distributed.  The 2nd year payment for the distribution is entered on your 2021 tax return Form 1040 on either Line 4b or 5b as ordinary income and taxed at your current tax rate.

[DanaB27]

Please be aware, that the taxes you paid in 2020 were only applied to 2020 and won't get spread out. You might have gotten some of the taxes refunded on your 2020 tax return since you only reported 1/3 of the income in 2020. Therefore, you will still have to pay taxes on the part reported for 2021.

As stated above "you might have to withhold some extra taxes from other sources in 2021 and 2022 because you have the added income in those years but no income tax withheld from the distribution for these years because the tax withheld on Form 1099-R only gets credited to 2020."

@DBLDAM