I left a job with my state just as the pandemic was ramping up in late January. Part of the separation process was that I took my 401k distribution with me. I was going to roll it into a 403B at my new employer, but I caught COVID the week I finally received the distribution and ended up using much of it to keep finances up.
When I was filing the 1099-R, it asks if I took the distribution for COVID-related purposes. I meet all of the requirements of the CARES ACT. I called the state and they didn't have an answer. Would I be able to take the distribution as a COVID distribution? I paid all the taxes on it when I left along with the penalty, so either way, I am good, but I am sure I am not the only one in this pickle.
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Yes, you can consider your distribution COVID related.
Withdrawals from a IRA because you were affected by COVID-19 are not subject to the 10% early withdrawal penalty. Additionally, the tax on the distribution can be paid over a three year period. You’ll have that time to pay back the funds you withdrew, without the amount impacting that year’s cap on contributions, and if you pay back the amount within that time, you’ll be able to claim a refund on those taxes.
In order to waive the penalty and elect to the option to pay the tax over three years, you will have to complete Form 8915-E, which has not been released by the IRS yet. If you would like to review a draft copy of the form, click the following link: Draft, Form 8915-E. Once the IRS finalizes and releases the form, TurboTax will make it available. Until then, you'll have to wait to finalize your and file your tax returns.
At this point and time the Form 8915-E (Qualified 2020 Disaster Retirement Plan Distributions and Repayments (Use for Coronavirus-Related Distributions)) is not finalized. We currently do not have an estimated date when the form is ready.
Please sign-up here and we will email you once the form is live.
Yes, you can consider your distribution COVID related.
Withdrawals from a IRA because you were affected by COVID-19 are not subject to the 10% early withdrawal penalty. Additionally, the tax on the distribution can be paid over a three year period. You’ll have that time to pay back the funds you withdrew, without the amount impacting that year’s cap on contributions, and if you pay back the amount within that time, you’ll be able to claim a refund on those taxes.
In order to waive the penalty and elect to the option to pay the tax over three years, you will have to complete Form 8915-E, which has not been released by the IRS yet. If you would like to review a draft copy of the form, click the following link: Draft, Form 8915-E. Once the IRS finalizes and releases the form, TurboTax will make it available. Until then, you'll have to wait to finalize your and file your tax returns.
At this point and time the Form 8915-E (Qualified 2020 Disaster Retirement Plan Distributions and Repayments (Use for Coronavirus-Related Distributions)) is not finalized. We currently do not have an estimated date when the form is ready.
Please sign-up here and we will email you once the form is live.
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