topic 401k withdrawal- where is the 8915E form? I paid federal taxes and am exempt from early penalty. Why am I still being asked if I want to pay all taxes now or in 3 years? in Retirement tax questions

401k withdrawal- where is the 8915E form? I paid federal taxes and am exempt from early penalty. Why am I still being asked if I want to pay all taxes now or in 3 years?

riveraf143 — Fri, 26 Feb 2021 16:35:19 GMT

Re: 401k withdrawal- where is the 8915E form? I paid federal taxes and am exempt from early penal...

MinhT1 — Fri, 26 Feb 2021 16:48:38 GMT

One of the relief measures for Covid-19 is the option to spread the taxation of your retirement distribution (up to $100,000) over three years.

Please read this IRS document for more information.

To take advantage of this option, please follow these steps:

Enter your form 1099-R normally.
After entering your form 1099-R, click Continue until you reach the screen Do any of these situations apply to you?.
Check the box which says I took out this money because of a qualified disaster (includes COVID-19).
Click on the radio button Yes this was withdrawn due to COVID-19 and click Continue.
Follow the interview until you arrive at the screen Was this a withdrawal due to COVID-19 or a Qualified Disaster Distribution?
Click on the radio button Yes this was withdrawn due to COVID-19 and click Continue
Follow the interview until you arrive at the screen Does [name] want to pay all the tax this year?
Click Continue and the taxation of your distribution will be spread over three years.

Re: 401k withdrawal- where is the 8915E form? I paid federal taxes and am exempt from early penal...

riveraf143 — Fri, 26 Feb 2021 23:54:37 GMT

Thank you!! I’m still a little confused. So where does the 8915-E form come in? Also, if I’m not paying federal taxes.. what taxes exactly am I paying over three years?

Re: 401k withdrawal- where is the 8915E form? I paid federal taxes and am exempt from early penal...

DawnC — Sat, 27 Feb 2021 00:10:46 GMT

You are exempt from the penalty, but you still pay the ordinary income tax on the distribution, 401K withdrawals are taxable. The 8915-E gives you the option of paying the ordinary tax over 3 years. If you had federal tax withheld, you will get a refund for any overpayment you made if you elected to spread the tax. The withholding is a flat 20% but that is not necessarily what you owe for taking the withdrawal. It is just an estimate and is reconciled on your tax return.

When you get to the question about spreading the tax, you are actually completing the 8915-E by answering those questions.

Re: 401k withdrawal- where is the 8915E form? I paid federal taxes and am exempt from early penal...

Critter-3 — Sat, 27 Feb 2021 00:18:21 GMT

Ok ... you may be exempt from the 10% penalty however the distribution is still taxable. You may have had federal taxes WITHHELD from the distribution (which will be added to your other withholdings on the return) you have not already paid the taxes on the withdrawal and the entire distribution must be added to the tax return. So you have the option to pay taxes on the distribution in full on the 2020 return OR spread the distribution over the 2020/2021/2022 returns equally ... just be aware the entire federal withholding will be applied to the 2020 return only so you may run short in the next 2 years which means you need to think about that option carefully and plan accordingly.

Re: 401k withdrawal- where is the 8915E form? I paid federal taxes and am exempt from early penal...

riveraf143 — Sat, 27 Feb 2021 00:52:39 GMT

Thanks so much! Helped a lot!

Re: 401k withdrawal- where is the 8915E form? I paid federal taxes and am exempt from early penal...

riveraf143 — Sat, 27 Feb 2021 00:53:31 GMT

Thanks so much! Now I understand!