I took a withdrawal from 401 k using the covid provisions to pay off a loan i had on my 401k to essentially get rid of the loan payment. anything special i should report?

[macuser_22]

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@Tequilajane wrote:

It says it is updated but is still trying to charge me 10% after saying I’m approved. Have you had any luck yet??  I had no luck with live help this past weekend.  

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Be sure to delete the 1099-R and re-enter so it gets reset.

[chee58]

I have the exact same question, but it doesn't seem to be clearly answered here or anywhere online:  I took a Covid 401K withdrawal and used the bulk of that money to pay off my 401k loan.  Does that count as a repayment?  Do I have to pay taxes on the amount I put back into my 401k to pay off the loan?

[Tequilajane]

What if you do qualify and already paid taxes when you set up the withdrawal?  It’s says I qualify and then tells me to pay 1/3 of the taxes due anyway.  I’m going crazy here.  

[macuser_22]

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@Tequilajane wrote:

What if you do qualify and already paid taxes when you set up the withdrawal?  It’s says I qualify and then tells me to pay 1/3 of the taxes due anyway.  I’m going crazy here.  

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You did  not pay the tax - you had tax withheld to pay it on your tax return.   The 1099-R box 4 amount gets added to other withholding on line 25 on the 1040 form to offset 2020 taxes.     1/3 of the box 1 amount will be taxable in 2020 on line 5b on the 1040 form.     The box 4 withholding might not be enough to offset the tax depending on your other income and tax bracket.

[fanfare]

@chee58 

  to pay it back is not taxed.

to take out more to pay it off is taxed.

So it doesn't sound like a good move.

Your 401k has not been rebuilt.

You must meet the COVID-related conditions to have avoided the 10% penalty and have your tax burden over three years.

If you still have  or will have funds, you have three years to put the distribution back in and rebuild your 401k that way.

The tax will be refunded and your 401k is rebuilt.

basically, doing that accelerates your original loan payment schedule to  a three year repayment schedule

[fanfare]

@chee58 comment added

[Tequilajane]

I did qualify for waiving the penalty.  I’ve called TurboTax Live Help three times since the COVID form has been added.  They keep telling me to check back because the software has not been adjusted for this portion yet, although the rest has been added for a few weeks?  

[fanfare]

on third of the tax is exactly what to expect when you divide by three.

If it is dividing then it is also waiving the 10% early withdrawal penalty.

[lab654]

It seems the COVID-related areas are working this weekend and so I tried to complete the whole process and e-file, but it wouldn't let me. it said I had to go back to my state area and highlighted the number of what was withdrawn under the CARES act, but didn't say what needed to be fixed.  It said they were still working on processing covid-related withdrawals and that I can wait or file by mail.  I would like to wait but wonder if others ran into this, or if there are thoughts on when e-filing would be possible? 

[macuser_22]

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@lab654 wrote:

It seems the COVID-related areas are working this weekend and so I tried to complete the whole process and e-file, but it wouldn't let me. it said I had to go back to my state area and highlighted the number of what was withdrawn under the CARES act, but didn't say what needed to be fixed.  It said they were still working on processing covid-related withdrawals and that I can wait or file by mail.  I would like to wait but wonder if others ran into this, or if there are thoughts on when e-filing would be possible? 

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If the state is MI, NY or HI then that is still being worked on.

[lab654]

Thank you!! It is one of those states so that must be the issue.

[Tequilajane]

After I made a post about having difficulty, I was linked to a specialist after talking to a tax preparer on TurboTax Live.  It took 2 hours, but I got it worked out.  I had already withdrew enough to cover the taxes but I it was still saying I owed.  However, the specialist explained that it was just a notice that the amount of taxes I paid would be spread out over three years.    The only thing I had to pay was state taxes. Is this similar to the issue you were having?  

[asrielle85]

Great info, but I followed all these directions and when I go to finish. I keep getting a "Check this Entry" for Form 1:  Penalties on IRA We're still working on updates related to penalities on IRAs, that qualify for disaster covid relief.

Then in box 22 it has the Penalties.... $538 x.33=178 . The $178 is the box that Is highlighted.

I chose to split up mine over 3 years and thus this year claimed $5,380.00. I am confused as to what I am supposed to put in the box of $178. Sorry if this is a dumb/confusing question. Any help would be appreciated.

[JamesG1]

In TurboTax Online Self-Employed I was able to enter a COVID pension distribution on IRS Form 8915-E and allocate the taxable income over three years.  No 10% penalty was assessed.

What version of TurboTax are you using?  When you refer to 'check this entry for form 1', are you referring to:

• IRS Form 1040 line 23 and
• IRS Form 1040 Schedule 2 Part II line 6?

Please clarify.

[Tony H]

I just purchased the Home & Business version yesterday (March 8th) and updated it.

It is still telling me the form is not available (image attached).