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Covid recontribution related state tax question

(1) I made a covid withdrawal in Aug 2020..for eg. the amount was $31000. There was no Federal tax withheld, but statetax to the amount of $3k was withheld and I received $28000 as the net amount.

(2) Now over 3 years I recontributed in equal amounts $31000 back to the current 401k account.


So, how do I file the taxes so that I get the $3k that was withheld in state taxes at the time of the distribution, or address that amount. I don't seem to be getting a correct answer from the accountant I spoke to.


Thanks in advance.


2 Replies
Level 15
Level 15

Covid recontribution related state tax question

The state tax that was withheld should have been included in the total state tax withheld on your 2020 state tax return. The state tax withheld should have been shown in box 14 of the 1099-R that you received for the 401(k) distribution. If it was shown in box 14, and the 1099-R was correctly entered in your 2020 tax return, then the state tax most likely was included on your state tax return. So you already got the $3,000 and it was applied to your 2020 state tax. There is nothing more for you to do.

If the total state tax withheld, including the $3,000 from the 401(k) withdrawal, was more than the total state tax that you had to pay for 2020, then you got a refund of the excess.


Covid recontribution related state tax question

Originally, you owed regular income tax on the withdrawal.  That was folded into your overall tax return, so you probably owed extra on your 2020 federal return (since you had no withholding), but the $3000 state withholding was applied to your state tax return so you owed less or may have gotten a refund.  That will show on your 2020 state return, print a copy and look it over.


Then, each year that you make a recontribution, you need to file an amended tax return for 2020 to change the amount that counts as a taxable withdrawal.  If your withdrawal amount is less, the tax will be less, and you will get a refund from the amended return that represents the difference between the original higher tax (on the original withdrawal amount) and the new lower tax (based on the withdrawal minus the recontribution). 


If you never filed amended returns to claim the repayment and adjust the amount of tax, you can do that with now (if you have made the last recontribution you plan to make).   You would file an amended 2020 return (federal and state), report the original withdrawal, and the total of the recontributions, and recalculate your income tax.  You would likely get both a federal and a state refund. 

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