2020 Amended Return for Missing 1099-R calculating 48% tax rate

[tstjohn21]

I e-filed in May 2021 for 2020 and received a refund. Later, I discovered a 1099-R that I forgot to file and have attempted several times to use TT to amend. Both my financial advisor and my CPA have told me the tax liability should be my normal tax rate + 10% penalty for taking distribution early (code 1D). Using TT to amend, the Fed total resets to $0 as it should but then calculates a 42% tax (48% total factoring in state tax).  This is not correct. I spent 2 hours with "Danielle" on 8/25/21 to no avail. She offered a refund on my purchase and even that wasn't resolved satisfactorily. Can anyone in this community of experts help?  TIA!

[macuser_22]

Nobody here can see your tax return or know what your actual tax rate might be or what you entered.

I suggest deleting the 1099-R and make sure that the tax returns to normal and then reenter.  

[Critter-3]

The addition of the 1099-R can affect many other things on the return ... compare  the original return line for line against the corrected one to see what happened.   Several things that could have been affected are your taxable SS benefits, adjustments on the 1040, Sch A deductions and credits (both refundable and non refundable). 

Switch to the FORMS mode to see the corrected 1040  and the 1040X. 

Look at the form 1040X …

Column A should have the figures from the original return, Column C the corrected figures and Column B the differences between the other 2 which needs an explanation on page 2 of the form 1040X.

If you completed it correctly you will see an entry on either line 16 OR 18:

On line 16 should be the amount you paid with your original return. If you paid nothing already then this line should be zero.

On line 18 should be the amount of your original refund you received.  If you have not received your refund yet then you need to wait for it.  If the refund changes from what you expected then this line must reflect that change.

Then you will see your extra refund on line 22 OR  the new balance due you need to pay on line 20.

[fanfare]

What is your original tax bracket ?

Taking a tax-deferred distribution can turn out to be very expensive.

If you are under age 59 1/2, add on the 10% early withdrawal penalty and other side effects will cause a heavy tax burden.

[tstjohn21]

@fanfare Effective tax bracket was 12% since I was impacted by Covid.  Even with 10% penalty I should not be at 48%.  I moved funds to another product that would produce higher returns so it was a thoughtful decision.  I feel like there is an technical error in calculation but I cannot get to an expert to assist. Can you guide me? 

[tstjohn21]

@macuser_22 I have deleted and started over a couple of times.  I even spoke to a live agent named Danielle on 8/25. We spent 2 hours on the phone and she could not figure out the issue. I guess I'm hoping I can get online with a different agent who can solve my problem. 

[VolvoGirl]

As Critter said above by adding more income it can affect other  things on your return.  Like reduce or eliminate a credit you were getting and make more of your Social Security taxable.   And when you increase your AGI that would decrease some deductions if you itemized on Schedule A.  

[Critter-3]

This may be one of those times when going to see  a LOCAL paid tax pro in person  would be the wise choice ... it is hard for anyone to diagnose or explain the issue over the phone or forum. 

[Critter-3 · Accepted solution]

Print a copy of the original return and the new 1040 ( and schedules)  and using the column b on the 1040X to see where the changes happen review the returns side by side and line by line ...  look to see how the increased income changes all the lines going down the long math problem.  Maybe if you post which lines changed we can help you diagnose your problem. 

[fanfare]

@tstjohn21 

If you were affected by COVID and took the distribution in 2020 but before Dec 31,  2020, there is no early withdrawal penalty. If your amended return includes Form 5329 you have to fix that.

Please clarify 48% on what?

of taxable income (line 15)? or,

of taxable distribution (line 4 or line 5)?

The latter is not out of the realm of possibility

for huge withdrawals with a penalty.

[Opus 17]

At this point, you can only be using the desktop software, not the online software, to prepare a 2020 return. In that case, the first thing you should do is to save a protected copy of your original tax return in a safe location so that you can always return to it and start the amending process over again.

Then, print a complete copy of your original tax return and a copy of the amended return and go over it line by line. You are looking for anything that changes.  You should see a change in the IRA distribution and in the 10% penalty.  As mentioned, the addition of additional income may change the taxability or deductibility of other items on your tax return that could contribute to the change in total tax. You will have to research this yourself, but once you have identified the changes, we may be able to explain them for you.