topic 401K covid 19 withdraw? in Retirement tax questions

401K covid 19 withdraw?

josh_richards_ — Fri, 15 Jan 2021 14:10:13 GMT

How are they going to figure out the taxes? We paid taxes on it when we withdrew but turbotax is wanting to tax us even more. its says "You'll need to revisit this area. The IRS instructions related to disaster distributions weren't ready in time for us to include them in this release. Please revisit this area later."

Re: 401K covid 19 withdraw?

SteamTrain — Fri, 15 Jan 2021 14:35:48 GMT

Apparently the COVID exemption from penalties is not ready yet in teh software.

They usually update the software on Wed or Thursdays....so revisit that 1099-R form and edit it again next week Friday to see if the software is ready to take that exception into account.

In the meantime, get everything else possible entered into the tax softwre..DO NOT File until it is all complete and correct.

Re: 401K covid 19 withdraw?

tiffanym130 — Thu, 21 Jan 2021 23:07:24 GMT

I'm getting the same error message today when I enter my 1099-G. It would be great if someone with Turbotax could answer when they will have the software updated or when the IRS plans to provide instructions.

Re: 401K covid 19 withdraw?

Opus 17 — Thu, 21 Jan 2021 23:49:56 GMT

@tiffanym130 wrote:

I'm getting the same error message today when I enter my 1099-G. It would be great if someone with Turbotax could answer when they will have the software updated or when the IRS plans to provide instructions.

No one knows and the IRS isn't telling. It will probably be in Turbotax 1-2 weeks after the IRS releases the final form and instructions. (It has to be programmed, then reviewed and approved by the IRS.)

Regarding the original question, the tax you had withheld -- generally 20% -- is only the mandatory minimum withholding. Although the 10% penalty for early withdrawal is waived for covid-related distributions, you still owe the regular income tax on the distribution. The actual tax you owe is determined based on your overall income, deductions, and credits, and can be 15%-36% federal and 3%-13% state, depending on where you live and your total income. You get credit for the amount withheld, and if you owe more you need to make another payment, if you owe less you get a refund of the excess withholding.