Repaying COVID-19-related distribution to my 401k after plan withholding

[findchris]

Thanks @DianeW777 and @fanfare - 

On my 2020 8915-E, on line 9 ("If you elect NOT to spread the taxable amount over 3 years, check this box"), that box is not checked, and so the amount entered on line 9 is 33,333.

I guess I'm just not clear on the withholding still.  If I don't get the original withholding (~$35,200) returned to me, then I have overpaid the IRA that amount and I'm out that money.  That can't be right.  What am I missing?  Just a reminder on my withholding logic:

- 401k has 100k, which I borrow, leaving $0 in my 401k

- I (regretfully) elected for 32% withholding on that 100k, so I ultimately received $64,800

- Now I'm paying it back, which I have to pay in full at 100k.

- My 401k is now fully repaid to 100k

- However, that original withholding (~$35,200) is still with the IRS, which I've now repaid, so I'd expect it to be refunded to me.

Thanks again!

[DoninGA]

@findchris 

You complete and file a 2020 amended tax return to get the taxes withheld refunded.

Go to this IRS website for information - https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-...

Q7. May I repay a coronavirus-related distribution?

A7. In general, yes, you may repay all or part of the amount of a coronavirus-related distribution to an eligible retirement plan, provided that you complete the repayment within three years after the date that the distribution was received. If you repay a coronavirus-related distribution, the distribution will be treated as though it were repaid in a direct trustee-to-trustee transfer so that you do not owe federal income tax on the distribution.

If, for example, 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.

[fanfare]

@findchris 

prepare your revised 2020 tax return and you will see exactly what your refund will be.

Your AGI goes down by $33,333.

You won't have to pay in 2021 or in 2022 any tax on 1/3rd.

Maybe when you print your 2020 Form 1040 it will hit you.

[fanfare]

@findchris 

did you file anything yet ?

Please reply back.

[findchris]

Hi @fanfare - After lots of thrashing, I think I understood everything and filed.

So we amended the 2020 return to get back the tax paid on the $33,333.  The withholding (my major sticking point) would have been taken into account on the 2020, so I understand that likely gave me a bigger refund in 2020 than I would have had otherwise, and so now understand your comment about not expecting to get that withholding returned to me.  Then on the 2021, we noted that we repaid 100% of the loan, so I think that concludes this adventure.  I appreciate your support and patience navigating the confusing world of the American tax code.