COVID-19 401K early withdraw California State Tax

[DanaB27]

If you selected on the federal return to split the amount over 3 years it will automatically carry over your California state return.

@airforcenine

[ung29378]

When will Turbo Tax will automatically carry it over for California? I am ready to file but I am not willing to do so until I know Turbo Tax has it done correctly for me. The confusing is on the California Tax in Turbo Tax under Pension and Annuity Adjustment.

[ung29378]

Just to confirm, since Turbo Tax automatically carried over Federal information and applied to California for splitting the distribution into 3 years equally, we don't need to complete the Section Pension and Annuity Adjustments for California tax filing. Is this correct? Please confirm. Thank you

[DanaB27]

Yes, TurboTax does this automatically and you do not need to make any adjustments.

You can verify this by looking at the State Summary:

1. Click on "Tax Tools" in the left menu
2. Click "Tools"
3. Click "View Tax Summary" in the Tool Center window
4. Click on "CA tax summary" on the left

[Fajita387]

So if I took $24,000 from my retirement under the COVID provisions and on my federal I split it over 3 years, so $8,000 each year then CA is the same? I leave the adjustments window blank and this year and the next 2 years the $8,000 will automatically flow over from when I fill out my federal taxes? 

I just don’t want to do this wrong. Thanks. 

[DanaB27]

Yes, CA follows the federal treatment. If you split it for 3 years on the federal $8,000 per year, then it will get carried on the CA state return.

[cb109]

Do you mind clarifying this? Why would I add $20,000 as an addition in 2020 and then $10,000 as a subtraction each year for 2021 & 2022? Couldn't I just add $10,000 as an addition in 2020, 2021, and 2022 since I am spreading the $30k over 3 years and CA follows the Federal rule here? Thanks in advance. I'm really stuck on this.

[DanaB27]

This doesn't apply anymore. TurboTax will automatically pull your federal information into the CA state return and report 1/3 of the distribution. 

In the beginning, the language on the CA website was unclear and it seemed that they would not allow to spread the distribution, therefore there were adjustments needed. But then CA updated their information and followed the federal rules.

@cb109

[cb109]

Thank you!! This is VERY helpful!!

[christinabebensee]

I'm really struggling with this portion because TT has not added the 1/3 distribution to my 2021 income and just keeps putting me in a loop of needing to revisit the retirement portion of federal wages and income. 

I really need help on what to do. We elected to do the 3 year reporting ($33,000 per year) for the 401k distribution my husband took in 2020. We obviously didn't get a 1099-R this year, but TT keeps bringing me back to that section. 

[DoninGA]

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@christinabebensee wrote:

I'm really struggling with this portion because TT has not added the 1/3 distribution to my 2021 income and just keeps putting me in a loop of needing to revisit the retirement portion of federal wages and income. 

I really need help on what to do. We elected to do the 3 year reporting ($33,000 per year) for the 401k distribution my husband took in 2020. We obviously didn't get a 1099-R this year, but TT keeps bringing me back to that section. 

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You must go to the Retirement Income section of the program for a Form 1099-R to be able to enter your 2nd year of the 2020 distribution -

Click on Federal

Click on Wages & Income

Scroll down to Retirement Plans and Social Security

On IRA, 401(k), Pension Plan Withdrawals (1099-R), click on the Start or Revisit button

On the screen Did you get a 1099-R in 2021? Click on NO, if you did not receive a 2021 Form 1099-R in 2022

If there is a Form 1099-R listed on the screen Your 1099-R Entries and you did Not enter a 2021 Form 1099-R then delete the form listed.

Answer Yes when asked Have you ever taken a disaster distribution before 2021?

Answer Yes when asked if you took a Qualified 2020 Disaster Distribution

Check the box that this was a Coronavirus-related distribution reported in 2020

In the box 2020 Form 8915-E, line 4, column b - Leave blank or enter a 0

This is not required on a Form 8915-F for a Coronavirus-related distribution

If the 2020 distribution was from an account that was Not an IRA

Enter 1/3 of the amount from the 2020 distribution in both boxes for Line 9

2020 Form 8915E, line 9, if you checked the box on that line, enter 0

2020 Form 8915E Line 9 

If the 2020 distribution was from an IRA account

Enter 1/3 of the amount from the 2020 distribution in both boxes for Line 17

2020 Form 8915E, line 17, if you checked the box on that line, enter 0

2020 Form 8915E Line 17 

Do not enter anything in the other boxes, leave them blank (empty) or enter a 0

The 1/3 of the amount from the 2020 distribution will be entered on the 2021 Form 1040 Line 4b if from an IRA or on Line 5b if from a retirement plan other than an IRA

After completing the Wages & Income section you will land on a screen Did you take a disaster distribution at any time between 2018 and 2020?

Answer NO since you have already completed the entering the 1/3 of the 2020 distribution.

You can view your Form 1040 at any time using the online editions. Click on Tax Tools on the left side of the online program screen. Click on Tools. Click on View Tax Summary. Click on Preview my 1040 on the left side of the screen.

Using the desktop editions click on Forms.  Open the Form 1040

You should not receive the "Needs Review" in the Federal Review section if -

You Leave blank or enter a 0 in the box for 2020 Form 8915-E, line 4, column b

[PatTax]

Ok so here’s an interesting twist for you all:

I failed to report my 401k withdrawal at all upon originally filing my 2020 returns (long story), so I recently got a letter from the IRS and subsequently used turbo tax to refile both my fed and state (CA) returns (each accompanied by a lovely bank cheque of course, ugh).

Today I received a REFUND from CA tax board of the exact amount I’d sent with my state re-file. 

This seems to indicate perhaps I don’t owe state tax on the early withdrawal at all - only federal? 

Surely that can’t be right, but I’ve never known CA FTB to ever make a mistake. 

Any experts here have thoughts on that?