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State CARES Act conformity regarding COVID 19 distributions

If so elected by the user for Fed, will Turbo Tax automatically spread the proceeds of a COVID-19 distribution over three years on the individual’s state return for those states that have adopted rolling conformity with the IRC?

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JotikaT2
Employee Tax Expert

State CARES Act conformity regarding COVID 19 distributions

Please see the information in the link below for an update on the state returns.

 

Form 8915-E state returns update

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DawnC
Employee Tax Expert

State CARES Act conformity regarding COVID 19 distributions

Yes, you will be able to e-file both your federal and Iowa state return with 8915-E.   Normally, disaster distribution forms are not e-filable, but with so many taxpayers using Form 8915-E this year, the IRS has made it possible to e-file it.   Iowa does not use the form.    

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27 Replies

State CARES Act conformity regarding COVID 19 distributions

I am wondering this also. It is not letting me finish my state return

AmyC
Employee Tax Expert

State CARES Act conformity regarding COVID 19 distributions

Many states begin with the federal AGI. Those would automatically have the correct distribution. For the others, the program will pull it through. You must have filled out the 8915-E and marked that you were affected by COVID.

 

In addition, you have those  same 3 years to repay the money. So you may be able to repay some of it in the next 2 years and not have to pay the full tax on your distribution.

 

Federal just finished the form so some states may be still trying to incorporate it into their system.

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State CARES Act conformity regarding COVID 19 distributions

I took the corona-related distribution in Oregon (in 2020 of course) then moved to NY a few weeks later (in 2020 as well). 

 

I intend to pay the entire state tax liability to Oregon, but the 401k distribution is included in my Federal AGI when calculating NY state income tax on my part-year return.  Does this mean that I am paying state tax on that distribution in NY, even though I took it (and paying it) in another state?

Is there a way to exclude the corona distribution from that NY state tax calculation?  I can't find one.

 

Any guidance is much appreciated.

State CARES Act conformity regarding COVID 19 distributions

Only issue is I keep getting this error and can't file.

 

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State CARES Act conformity regarding COVID 19 distributions

I never saw that message.  Must be an option I didn't look into.  What are you specifically doing to produce that error?

KathrynG3
Expert Alumni

State CARES Act conformity regarding COVID 19 distributions

Form 8915-E, which is needed to have the early distribution penalty waived and spread the taxation of the distribution over three years, is now available, which will clear the Check this Entry diagnostic. Try closing the program and the browser. Re-open in Chrome to see the update in the system.

 

Check that your My Info section includes the move if there was earned income in each state. Return there by clicking on My Info in the left menu.

 

As a part-year resident, income must be split between your states of residency. Unearned income will be taxed in the state where it was received. This will be done by allocating the income in the state interviews when prompted.

 

To file a part-year tax return, always end with entering the state where you lived on December 31. If you did not, follow these steps:

  1. Delete both states, one at a time:
    1. In TurboTax Online 
    2. In TurboTax CD/Download
  2. Re-add the states in the sequence described above, ending with where you were living December 31.

For more information, see: 

What is Form 8915-E Qualified 2020 Disaster Retirement Plan Distributions and Repayments?

How does TurboTax calculate taxes on part-year returns?

 

@Hadar

@TheMugzzy

State CARES Act conformity regarding COVID 19 distributions

"Form 8915-E, which is needed to have the early distribution penalty waived and spread the taxation of the distribution over three years, is now available, which will clear the Check this Entry diagnostic. Try closing the program and the browser. Re-open in Chrome to see the update in the system"

 

Unfortunately this is incorrect. My software is fully updated and the new form is applied and filled out but still receiving this error for state and won't let me file.

State CARES Act conformity regarding COVID 19 distributions

Same situation ongoing for me in NY. I was told by a Turbo tax Rep on the phone Thursday that it was suppose to be fixed yesterday. It seems that it did not happen? Who knows ..Very frustrating

State CARES Act conformity regarding COVID 19 distributions

Are you all trying to use that retirement worksheet to spread your distribution over 3 tax years for NY State?

State CARES Act conformity regarding COVID 19 distributions

I cannot locate the My Info section on the left menu.  There is only 'Tax Home', 'Documents', 'Intuit Account', and 'Sign out' on the left column.

Is there another way to get to that section?  Does it have another name?

State CARES Act conformity regarding COVID 19 distributions

I apologize.  I've located My Info.  It does acknowledge my move from Oregon to NY State.

 

I'm just fearful that my situation is uncommon and NY doesn't have a way to accomadate it this tax year.  At least I can exclude my distribution amount in the NY column on the part-year return this year.  But what happens Next year and the year after (Federal AGI will include my 401k distribution from Oregon over 3 tax years) when I file as a full-year NY resident?  There will be no separate column allowing me to exclude the corona distribution (taken in OR). 

State CARES Act conformity regarding COVID 19 distributions

No, While Turbo Tax does is review process it comes up with sections to review both for Federal and State to make sure the info is correct.

In my case it is in regards to for 1099-R box 14. It looks like the software is not working correctly because it is saying that that NYS withholding cannot be greater then the state distribution(box16) which is zero. That makes sense.... however box 16 is blank on the 1099-R on both mine and my wife's 1099-R(both different companies)

However it will work if I put in the amount of my 401k withdrawal amount in box 16(even though it is blank on the 1099-R). I don't know if I explained it right...sorry. 

KathrynG3
Expert Alumni

State CARES Act conformity regarding COVID 19 distributions

For years when you are no longer filing as a part-year resident, any further adjustments may be filed as a nonresident.

 

See: How do I file a nonresident state return?

@Hadar 

 

It is acceptable to add your 401k withdrawal amount for Box 16, even though it was received with nothing listed in Box 16 in order to satisfy the TurboTax question.

 

@brpry171

 

For more details: Where do I enter my 1099-R?

How are my taxes affected by the coronavirus (COVID-19) pandemic?

State CARES Act conformity regarding COVID 19 distributions

I am paying the entire tax liability for the corona distribution to Oregon in 2020 (they don't allow spreading over 3 tax years), but paying the federal over 3 years.

Is it possible to file a nonresident return for the income in 2021 and 22 when it was already paid in full in 2020?

 

It seems like there should be a qualification for exempting that income from NY state tax.  Perhaps that will be implemented by next year?  Any thoughts?

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