Cares Act 401k and 1099-R

[Mitz22]

I took a CARES Act withdrawal in 2020 and also age 55. I received a 1099-R with a "2" in box 7. No other codes on the form. Some of the money was transferred in from an old employer. I tried to repay a portion of the money this year and was told I cannot due to the Rule of 55. How would I indicate that on this years taxes?

[ColeenD3]

When you are entering a repayment for 2021, there is no 1099-R. The two screen that pertain to this are:

• Have you ever taken a disaster distribution before 2021?
• Did you take a disaster distribution at any time between 2018 and 2020?

You would answer yes to both. The Form 8915 is not yet available.

As far as the IRS is concerned, the only thing the rule of 55 pertains to is avoiding the 10% penalty. However, the problem might not be with the IRS. 

Q12. Is an eligible retirement plan required to accept repayment of a participant's coronavirus-related distribution?

A12. In general, it is anticipated that eligible retirement plans will accept repayments of coronavirus-related distributions, which are to be treated as rollover contributions. However, eligible retirement plans generally are not required to accept rollover contributions. For example, if a plan does not accept any rollover contributions, the plan is not required to change its terms or procedures to accept repayments.

[Mitz22]

Thank you for this info. Is there any way to indicate on my taxes that they will not accept repayment?

[FangxiaL]

It sounds like you tried to pay back the money to the same retirement account and someone told you that you could not do that, correct?

You don't have to put the money back into the same account that you took the money from. You can set up a rollover IRA account with a brokerage firm and deposit the money in that account. 

It is your choice to pay back some of the money. If you elected to pay tax only on 1/3 of the distribution last year, this year you will pay tax on the 2nd 1/3 of the distribution.

When Form 8915-F is ready, let TurboTax know that you have already paid back 1/3 or whatever amount you put back into a retirement account. 

If you paid tax on 1/3 of the distribution last, and you decide to pay back all of it by this time next year, you can go back to amend your 2020 return to get back the extra tax dollars you paid. 

@Mitz22

[Mitz22]

Yes, that is correct. Thank you for your advice! 

[dmertz]

"I cannot due to the Rule of 55."  It's not so much the Rule of 55 that's the issue, it's the fact that you are no longer employed by this employer.   If the plan accepts rollovers at all, the plan apparently only accepts rollovers made by those who are still employed with the company.  As FangxiaL said, just roll it over to an IRA.