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?
I am wondering this also. It is not letting me finish my state return
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.
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.
I never saw that message. Must be an option I didn't look into. What are you specifically doing to produce that error?
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:
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?
"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.
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
Are you all trying to use that retirement worksheet to spread your distribution over 3 tax years for NY State?
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?
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).
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.
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?
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.
For more details: Where do I enter my 1099-R?
How are my taxes affected by the coronavirus (COVID-19) pandemic?
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?
You will not have to file an Oregon return for 21 and 22 since it was already included.
The 1/3 distribution income will be included on your 21 and 22 federal and state tax returns so they will be included on your New York tax returns, but you will get a credit for tax paid in other state (Oregon) on your subsequent New York tax returns (1/3 for each year to offset the income.
[Edited 02/27/2021 | 8:47 PM PST]
Is this additional form to report and pay back the prorated tax a Federal form? Does it keep the coronavirus 401k distribution portion of my income off of my Federal AGI in 2021 and 22?
More importantly, will this form keep that distribution income away from NY State? That's the focus of my issue: sheltering the 401k distribution received in Oregon from NY State over the next 2 tax years.
Yes you use Form 8915-E for qualified 2020 disaster distribution that qualifies for favorable tax treatment (including Coronavirus).
Generally, a qualified 2020 disaster distribution is included in your income in equal amounts over 3 years. However, if you elect, you can include the entire distribution in your income in the year of the distribution.
You will be able to claim the credit for taxes paid to Oregon on your 2021 and 2022 tax returns- you will be able to list the federal amounts and apply 1/3 of the tax your paid to Oregon in 2020.
[Edited 02/27/2021 | 7:45 PM PST]
So the additional form you mentioned earlier is 8915-E. I've actually worked through all of my 2020 returns and dealt with Form 8915-E already. Only 1/3 of the corona distribution is being reported on my 2020 Federal return (and on my part-year NY return as part of Fed AGI). The entire 100% of corona distribution is reported on OR state return.
But you have stated that the remaining 2/3 will NOT be reported on my next 2 returns. How does 8915-E keep it off of my Federal return going forward? That's not how I expected this to play out, but I'm happy to go along with whatever gets the job done.
I was concerned by my inability to completely exempt the 401k from NY State and have been eager to find out what lies ahead as this plays out over the next 2 years.
Please correct me if I'm misreading or misinterpreting anything you've told me thus far.
"You will be able to claim the credit for taxes paid to Oregon on your 2021 and 2022 tax returns- you will be able to list the federal amounts and apply 1/3 of the tax your paid to Oregon in 2020."
Thanks for your responses. I wish I could say I understood this, but I'm not certain how all of this will keep the distribution off of my future NY State returns. That's the only bit I want clarification on. Or is it just too early in the process to be sweating about all of this?
Things would be simpler if I hadn't decided to move states.
Since only 1/3 has been reported on the Federal return, the remainder of the distribution will be included on the federal return in 2021 and 2022.
Separately, for the state, since 100% of the income was reported to Oregon in 2020, and since it cannot be double taxed, your distribution should be identified as Oregon-sourced in New York for 2020.
The Federal Adjusted Gross Income will include 1/3 of the distribution in 2021 and 2022, respectively. This should be removed from the state taxation because it was already taxed.
For 2020: File Part-year resident returns in OR and NY.
For 2021 and 2022: File the Resident return in NY, and if necessary, file Nonresident returns for OR to allocate the 1/3 distribution to Oregon. In the OR return, deduct the distribution since it was already 100% reported in 2020.
You will need to keep careful records of when the distribution was received, identifying it clearly as sourced in Oregon. Retirement income is only taxable in the state of residence where it was received.
"The 1/3 distribution income will be included on your 21 and 22 federal and state tax returns so they will be included on your New York tax returns, but you will get a credit for tax paid in other state (Oregon) on your subsequent New York tax returns (1/3 for each year to offset the income."
OK. That sounds good. I did not see your reply right away because the older existing post was edited instead of creating a new one.
So the credit for State income tax paid to Oregon in full in 2020 will be awarded to me on my 2021 and 2022 New York State returns, completely eliminating the amount I would owe NY for that 1/3 of 401k retirement income?
Is this a calculation that TurboTax will take care of for me based on the info it has in my OR 2020 return?
"Separately, for the state, since 100% of the income was reported to Oregon in 2020, and since it cannot be double taxed, your distribution should be identified as Oregon-sourced in New York for 2020."
This current 2020 return is where I'm stuck. I'm unable to completely exclude the 1/3 of the distribution reported on 2020's Fed return from NY State part-year resident return.
NY bases tax off of Federal AGI, and the 401k income from OR is included in that number in the Federal column. Is that proper? I would expect to have the ability to exempt that portion from federal AGI.
I AM able to exclude the 1/3 distribution amount from the NY income column, which reduces the percentage of NY income vs Federal.
But why am I not able to identify that income as Oregon-sourced on NY's return. There doesn't seem to be a way to do that this year.
*EDIT: I re-read a post by MaryK1101. She stated --Unfortunately New York does not allow an exemption of the income in the part-year return.
Does this sound right?
"For 2021 and 2022: File the Resident return in NY, and if necessary, file Nonresident returns for OR to allocate the 1/3 distribution to Oregon. In the OR return, deduct the distribution since it was already 100% reported in 2020."
This would be a bit complicated for me, I think. Will TurboTax walk me through this? Or do I need to hire someone?
That worked for federal. But it’s not working for state. I’m in ny. I spent hours on the phone yesterday to do what you explained and fixed federal but it won’t allow me to continue bc that error message comes up and says they are still continuing to work on the issue. So I’m assuming it’s a state issue and not turbo tax.