In 2020, I took out $25,000 from my retirement fund, early. How is COVID relief reported on my taxes this year?

[hillarymiserman]

Savings Plus said that it was authorized due to my pay being cut due to COVID but Turbotax is not reflecting COVID relief

[DawnC · Accepted solution]

You will be able to waive the penalty and spread the ordinary tax over 2020-2022.  However, the forms have not been finalized by the IRS yet, so TurboTax has not been updated.  Once the forms are final (no date determined by IRS yet), you will see the options to apply the tax relief provisions on Form 8915-E.   The IRS does not start accepting returns until Feb 12th, so check back then to see what the status is.  But yes, you will see those options in TurboTax in the near future.

Those who qualify as individuals directly impacted by the pandemic will be able to withdraw up to $100k from their retirement accounts without facing the 10% early withdrawal penalty.

You qualify if:

• You, your spouse, or your dependent are diagnosed with COVID-19
• You experience adverse financial consequences as a result of being quarantined, furloughed, or laid off
• You had work hours reduced to COVID-19
• You’re unable to work due to child care closure or hour reduction

The distribution would be taxed over 2020, 2021, and 2022. You’ll have that time to pay back the funds you withdrew, without the amount impacting that year’s cap on contributions, and if you pay back the amount within that time, you’ll be able to claim a refund on those taxes.

As things change, TurboTax is continually updated and able to handle every situation that arises to ensure your taxes are done right, so you’ll receive your maximum refund.

[hillarymiserman]

Can I pay back the funds i withdrew, without the amount impacting that year’s cap on contributions, within the 3 years time on ether my 401 K or my 457 accounts or does it need to be returned from the exact account I took the funds out of to be able to claim a refund on those taxes?

[DawnC]

You’ll have that time to pay back the funds you withdrew, without the amount impacting that year’s cap on contributions, and if you pay back the amount to any qualified plan within that time, you’ll be able to claim a refund on those taxes.   The distribution, whether an actual distribution or a plan loan offset, can be made from a variety of retirement plans:

• An IRA: traditional, SEP, SIMPLE, or Roth.
• A qualified pension, profit-sharing, or stock bonus plan (including a 401(k) plan).
• A qualified annuity plan.
• A tax-sheltered annuity contract.
• A governmental section 457 deferred compensation plan.

The total of all qualified distributions from all retirement plans is $100,000. The excess over $100,000 may be subject to the additional tax on early distributions. If separate forms are being completed for a taxpayer and spouse, the $100,000 limit applies to each separately.  

The CARES Act also provides that any part of a COVID-19-related distribution is eligible for tax-free rollover treatment to be recontributed to a qualified plan within three years of receipt and therefore excluded from income.   Any amount recontributed is treated as a direct tax-free rollover where eligible or as an indirect rollover with the typical 60-day requirement adjusted to three years.   A recontribution is not subject to the one-rollover-per-year limitation. 

All COVID-19-related distributions must be treated consistently, either all reported fully in the tax year withdrawn or all reported ratably over three years. 

[teresamorgan0301969]

Hello, @DawnC 

Is Form 8915-E available today? 

Thank you,

Teresa M. 

[DoninGA]

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@teresamorgan0301969 wrote:

Hello, @DawnC 

Is Form 8915-E available today? 

Thank you,

Teresa M. 

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Form 8915-E, Qualified 2020 Disaster Retirement Plan Distributions and Repayments is scheduled to be available in TurboTax on 02/25/2021

Go to this website for IRS forms availability in TurboTax - https://care-cdn.prodsupportsite.a.intuit.com/forms-availability/turbotax_fed_online_individual.html