Why is a COVID related pension withdraw included in my AGI? This was an emergency and now am being penalized and won't receive a stimulus? This makes no sense to me?

[jlfeuch]

I filed 2020 taxes.  I had a COVID related pension withdraw.  This now puts my AGI over the limit to receive stimulus check.  I am livid.  Obviously I am experiencing financial hardship if I withdrew from a pension and now being penalized for that hardship.  Is this correct?  Without the withdrawal I was well under the AGI requirements.  If I had known I wouldn't have filed my taxes.  Please help

[JamesG1]

Qualified 2020 Disaster Retirement Plan Distributions are reported on IRS Form 8915-E.

Are you able to elect to report the taxable income from the distribution over three years?  Or does even the one-third put you over the AGI limits that you are referring to?

See IRS Coronvirus Relief for Retirement Plans and IRAs under Coronavirus-related distributions from workplace retirement plans and IRAs.

Taxes on distributions: 

Coronavirus-related distributions:

• Are included in taxable income
  • Over a three-year period, one-third each year, or
  • If elected, in the year you take the distribution.
• Are not subject to the 10% additional tax on early distributions (including the 25% additional tax on certain SIMPLE IRA distributions) that may otherwise apply to most withdrawals before age 59 ½
• Are not subject to mandatory tax withholding, and
• May be repaid to an IRA or workplace retirement plan within three years, if eligible for tax-free rollover treatment.  

[jlfeuch]

Correct, I did not pay additional tax or penalties on the distribution, but it’s still counted in AGI calculation which now puts me over the 160,000 maximum so now I’m disqualified for stimulus because of this .  Is this correct.  We actually made less money in 2020 than previous years without the distribution.   

[CatinaT1]

Did you spread the tax on the distribution over 3 years?  If you didn't, would splitting the distribution over three years put you below the threshold?  If so, you can amend your return to lower your AGI.

See this TurboTax FAQ for help with amending.  

You can check the status of your amended return here, but allow 3 weeks after filing for it to show up.  

[jlfeuch]

Does it have to be equally spread over the three years?   And if so , how do I do that?  

[jlfeuch]

I paid all taxes when taking the distribution .  I did not spread the taxes out.  

[ReneeM7122]

If you withdrew money from your retirement account, it is still considered taxable income.  It is not subject to an early withdrawal penalty.  Taxable income is included in the adjusted gross income, regardless of whether it came from employment or retirement distributions.  You can file an amended tax return to spread the payments if you have not already disbursed payments to the IRS, and change it to spread for three years.  

When you're ready to amend, find your situation below and follow the instructions.

TurboTax Online

TurboTax CD/Download

@jlfeuch

[fanfare]

@ReneeM7122 

" if you have not already disbursed payments to the IRS,"

what is this supposed to mean?

There are no preconditions preventing an amendment in this situation.

[fanfare]

@jlfeuch 

Don't be livid.

You can pay back amounts taken due to COVID over three years 

for instance, if you split over three years, and pay back one third, your 2020 tax is zero on that and your AGI goes back down to where it was.

OR, split in three and pay back just enough to bring your AGI down below $150,000 ($75.000 if single).

You have until the due date of your return, including extensions to pay back an amount for 2020. You must amend,

[grf714grf714]

I got screwed also.  I took from my 401k after I retired to buy a house and fix up.  Shud have waiting to file my 2020 taxes also.  Blame the SENATOR FROM WEST VIRGINA. AND THE REPLICANS LOWERD FROM 200000