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New Member
posted Mar 5, 2021 11:34:34 AM

I took withdrawals from two 401k for qualified Covid purposes. I am being charged the 10% penalty for the Roth 401(k) draw and was not asked by TT if it was for C19.

The taxable withdrawal was for $7,491 and the penalty tax is $749.  The 1099-R withdrawal code was B1, different from the other withdrawal I made where the penalty tax was not charged.  How do I get the TT system to remove the penalty tax?

0 3 374
3 Replies
Expert Alumni
Mar 5, 2021 11:46:52 AM

One of the relief measures for Covid-19 is the exemption of the early withdrawal penalty when you are younger than 59 1/2.

 

Please read this IRS document for more information.

 

To take advantage of this exemption, please follow these steps:

 

  1. Enter your form 1099-R normally.
  2. After entering your form 1099-R, click Continue until you reach the screen Do any of these situations apply to you?
  3. Check the box which says I took out this money because of a qualified disaster (includes COVID-19).
  4. Click on the radio button Yes this was withdrawn due to COVID-19 and click Continue.
  5. Follow the interview until you arrive at the screen Was this a withdrawal due to COVID-19 or a Qualified Disaster Distribution?
  6. Click on the radio button Yes this was withdrawn due to COVID-19 and click Continue
  7. Follow the interview until you arrive at the screen Let's check if you're exempt from additional taxes
  8. Check the appropriate radio buttons and your withdrawal will be exempted from the 10% penalty.

Level 15
Mar 5, 2021 11:48:50 AM
Level 15
Mar 5, 2021 1:15:39 PM

The workaround is to omit the code B, complete the remainder of the 1099-R entries to indicate that the distribution was a coronavirus-related distribution (CRD), then edit the 1099-R to add the code B selection.  The CRD-related entries will remain.