topic I withdrew money from my 401k because it classified as a hardship since my position was eliminated due to covid. Is that considered income and how should I report it. Do I pay tax on it as well or can in Retirement tax questions

I withdrew money from my 401k because it classified as a hardship since my position was eliminated due to covid. Is that considered income and how should I report it. Do I pay tax on it as well or can

capemover — Thu, 17 Dec 2020 14:14:47 GMT

Re: I withdrew money from my 401k because it classified as a hardship since my position was eliminated due to covid. Is that considered income and how should I report it. Do I pay tax on it as well or can

Opus 17 — Thu, 17 Dec 2020 14:42:45 GMT

Withdrawals from 401(k) plans and other qualified retirement plans with pre-tax contributions are always taxable income. If you certify on your tax return that the withdrawal was due to a Covid related hardship, you are exempt from the 10% penalty for early withdrawal, but you still must pay the regular income tax.

You will receive a form 1099 – R, which must be mailed to you by January 31, or may be available for you to download from the plan trustee’s website. You will enter this as income on your tax return. If the plan trustee withheld some tax from the withdrawal, this is only an estimate and does not represent the full amount of tax that you owe. You will get credit for the withholding and after your taxes are calculated, if you had too much withheld you will get a refund and if you did not have enough withheld you will owe more tax.

Re: I withdrew money from my 401k because it classified as a hardship since my position was eliminated due to covid. Is that considered income and how should I report it. Do I pay tax on it as well or can

dmertz — Thu, 17 Dec 2020 15:11:58 GMT

Note that this distribution is not a hardship distribution as defined in the tax code. For a Coronavirus-Related Distribution, you have the option to include this income in equal parts on your 2020, 2021 and 22 tax returns to spread out the tax burden. You also have up to 3 years from the date of the distribution to repay some or all of a CRD and eliminate the associated portion of the tax liability.

Re: I withdrew money from my 401k because it classified as a hardship since my position was eliminated due to covid. Is that considered income and how should I report it. Do I pay tax on it as well or can

krdodgin — Mon, 22 Feb 2021 18:28:01 GMT

How do I enter this information to show it is a coronavirus related distribution?

Re: I withdrew money from my 401k because it classified as a hardship since my position was elimi...

JamesG1 — Mon, 22 Feb 2021 19:04:56 GMT

In TurboTax Online, enter the pension distribution / 1099-R at Federal / Wages & Income / IRA 401K Pension Plan Withdrawals (1099-R) as you ordinarily would.

At the screen Tell us if any of these uncommon situations apply, click I took out this money because of a qualified disaster (includes COVID-19).

However, IRS Form 8915-E Qualified 2020 Disaster Retirement Plan Distribution and Repayments is not fully functional.

Today, a tax return with IRS Form 8915-E can only be paper-filed. Eventually, tax returns with IRS Form 8915-E will be able to be e-filed but that option is not available today. Forms availability says the form may be available February 25.

Forms availability is here.

Re: I withdrew money from my 401k because it classified as a hardship since my position was eliminated due to covid. Is that considered income and how should I report it. Do I pay tax on it as well or can

Opus 17 — Mon, 22 Feb 2021 20:39:17 GMT

This part of the program is expected to be ready on Feb 25. If you enter the 1099-R now, you will have to go back over this section again when the program is ready and make your correct selections. I would just delete the 1099-R for now and enter it when the program is ready.