If you took a distribution from a retirement account due to corona virus related issues, you will be able to waive the penalty and spread the ordinary tax over tax years 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.
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.
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