State CARES Act conformity regarding COVID 19 distributions

[MaryK4]

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] 

@Hadar

[Hadar]

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.

[MaryK4]

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]

@Hadar

[Hadar]

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.

[Hadar]

"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.

[KathrynG3]

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.

@Hadar

[Hadar]

"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?

[Hadar]

"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?

[Hadar]

"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?

[Dman6175]

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. 

[JotikaT2 · Accepted solution]

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

Form 8915-E state returns update

[Cyclones42]

@JotikaT2 

Thank you very much for the link.  It was very helpful.  Will I be able to efile my Iowa return if I use form 8915-E on my federal return?  Also, are federal returns e-fileable in Turbo Tax if they contain form 8915-E?  Any insight you can provide would be greatly appreciated.  Thanks again.

[DawnC · Accepted solution]

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.