I took an early distribution from my ira due to covid 19. i know i can repay tax free in 3 years, but turbo tax is saying i owe for the distribution. ?

[fanfare]

What I meant to say, if you repay more than a third,

only a third is credited in the current year.

Therefore, I don't think there is any advantage to do so.

(other than to take the funds out of your hands so you can't spent them elsewhere).

[Caseyblue]

Not sure if that is correct.

DF1006 has seemed to indicate you should repay more $ in a higher income.

[SamS1]

You cant reduce the amount includable in income to a negative number.  If you have 1/3 of the distribution due the next 2 years, paying more than 1/3 will not give you a deduction on your tax return.  It would only decrease the amount you have to pay the following year to cover the last 1/3.

[Caseyblue]

Not looking to reduce to negative number but as DF1006 has seemed to suggest  it might be a good idea to repay more $ in one of the 3 years with  higher income.

Perhaps repay 50%, 30%, 20% over next 3 years starting with 2020 ?

[fanfare]

8915-E Instructions. Page 10.

"Enter on line 18 the amount of any
repayments you made before filing your
2020 return. Do not include any repayments
made later than the due date (including
extensions) for that return nor any
repayments of nontaxable amounts. If you
elected to spread the income over 3 years
and you repaid more than the amount on
line 17, the excess will be carried forward to
your 2021 tax return."

[Caseyblue]

with the tax filing deadline extended, is the repayment period extended also for the first year’s repayment?

[PattiF]

Yes, the payment date for the 2020 Tax Return is extended to May 17, 2021. 

[allkerri]

Expert answer here!!  Thankyou for the help - this got my issue all cleared up.

[Caseyblue]

What are the effects of not paying it back?

[DanaB27]

If you decide to not pay it back then the amount distributed will be fully taxable but you can still elect to spread the amount over 3 years.

You’ll have three years to decide if you want to pay back the funds you withdrew, without the amount impacting that year’s cap on contributions. If you pay back the amount within that time (can also be partial repayment), you’ll be able to claim a refund on those taxes paid when you file an amended tax return. Please see IRS Coronavirus-related relief for retirement plans and IRAs for more details.

Example from the IRS:

If you receive a coronavirus-related distribution in 2020, you choose to include the distribution amount in income over a 3-year period (2020, 2021, and 2022), and you choose to repay the full amount to an eligible retirement plan in 2022, you may file amended federal income tax returns for 2020 and 2021 to claim a refund of the tax attributable to the amount of the distribution that you included in income for those years, and you will not be required to include any amount in income in 2022.

@Caseyblue

[danaT]

When will this be ready?  I'd like to do my taxes.  With so much fraud, you have to file fast so someone doesn't file as you instead, but I am waiting to do my 2nd year of IRA payment. 

[FangxiaL]

Form 8915-F will be ready on 3/31/2022.

To report the 2021 CARES Act retirement plan distribution for 2020 that gave you 3 years to repay it back, follow these steps:

With your federal return open:

1. In the search box, type 1099-r, then Jump to 1099-r
2. On the next screen, select No if you did not receive a 1099-R in 2021
3. On the next screen, select Yes to Have you ever taken a disaster distribution before 2021?
4. Select Yes, I took a disaster distribution between 2017 and 2020 on the next screen
5. The message below is what you will see because the form is not ready as of today. The new form is expected sometime in March.

You'll need to revisit this area

Unfortunately, IRS instructions related to repayments of disaster distributions weren't ready in time for us to include them in this release. Please revisit this area later.

@danaT

[Mimi Productions]

Hi,

I took a COVID-19 early distribution from my Traditional IRA in 2020. On my 2020 tax return I chose to spread the tax liability over the three year period allowed and I paid back a little in 2020.  In 2021 I paid back more, plus my allowed amount for my age bracket.  On the 2021 Form 5498 that I received from the investment firm on account it shows my COVID-19 early distribution repayment as a ROLLOVER.  In Turbotax when asked if my early distribution was a disaster distribution, I answer yes, but the next question is about Sept 11, 2001 disaster not COVID-19.  So it looks like now that I over contributed to my IRA and that I will pay a penalty. There also is no area to input info about spreading the tax liability over the three year period. I even opened the return itself and I do not have form 8915-F.  Since tax day is coming up soon when will Turbo tax update this?

[DaveF1006]

To clarify, did you enter a 1099R distribution this year?

[Mimi Productions]

No, because I took the distribution in 2020.  I entered it in 2020 tax return and there isn't a 1099-R for 2021 because it was taken out in 2020.  In preparing the return for 2020 tax year when the question came up in Turbo Tax during the 1099-R session about how this was  COVID early distribution, this questions came up "do you want to pay the taxes in full this year for this early distribution?"  I chose not to pay the taxes in full in 2020.  It then said Turbo Tax in 2021 and 2022 would have instructions on what to do with additional repayments .  I can't find that anywhere.  

Are you saying I have to enter in a 1099-R in 2021 when I didn't receive one?