1099-R Covid distribution and how to file with tax withheld

[paintacar]

I am lost on what to do in Turbo Tax regarding 1099-R

My form Shows Gross Distribution as the same amount as Taxable amount also has Box 4 Federal Tax withheld about 10% When entering in Turbo tax asking if I want to pay all the tax this year or over 3 years? seems to me the tax has been paid correct? this is on my 2020 tax year now I'm working on 2021 I haven't received a 1099-R, however its asking me the same question if I received any withdrawals in prior year. I don't know if I chose to divide the tax over 3 years and  paid tax I already paid and now it is adding tax onto something I already paid again in 2021. It's not clear what's going on. How can I tell? and is the tax already paid? do I just forget about the 2020 status and enter nothing in 2021?

[DanaB27]

No, if you selected to spread it over 3 years on your 2020 tax return then you will have to report the 2nd portion on your 2021 tax return.

Please follow these steps to report the 2rd portion of the COVID distribution on your 2021 tax return (if you selected to spread it over 3 years on your 2020 tax return):

1. Login to your TurboTax Account 
2. Click on the "Search" on the top and type “1099-R” 
3. Click on “Jump to 1099-R” 
4. If you do not have any 2022 1099-R answer "No" to "Did you get a 1099-R in 2022?" (If you have any other 1099-R then enter all 1099-R and after entering your last 1099-R click "Continue" on the “Review your 1099-R info​​​​​​​” screen)
5. Answer "Yes" to the "Did you take a disaster distribution in prior years…?" screen
6. Answer "Yes" to "Did you take a 2020 Qualified Disaster Distribution?"
7. Check the box next to "If this was a Coronavirus-related distribution reported in 2020 check here" and enter your information.

 Please verify that you check the box next to "If this was a Coronavirus-related distribution reported in 2020 check here". Also, make sure you enter the amount from Form 8915-E, line 9 twice (if it was not from an IRA) or enter the amount from Form 8915-E, line 17 twice (if it was from an IRA). This amount should be 1/3 of your 2020 COVID distribution.

[paintacar]

I understand what you are saying, that I was asked if I wanted to pay all the tax in 2020 or divide over 3 years, however in this section, it does not ask about taxes already paid on the amount, which I already paid 15% on the 1099-R that the amount being divided into 3 years is reported on. example lets say on the 1099-R it says the gross and taxable amount is 10,000 and Box 4 Federal tax withheld was 1,500. but then it divides the 10,000 into thirds and taxes me on it? but what about the 1.500 I already paid? It appears I am being double taxed on the 10,000 first paid when distributed then again over 3 years.

[DanaB27]

No, you are not being double-taxed. The taxes withheld were only applied to 2020 because they were withheld in 2020. There aren't split up over three years only the distribution is split up. You most likely got some of the taxes withheld refunded on your 2020 return. You can see the tax withheld on line 25b of your 2020 Form 1040. You won’t enter any taxes withheld on your 2021 tax return for the Covid distribution, you only enter the steps mentioned above. And will have to pay the taxes (depending on your tax bracket for 2021) on the second portion of the Covid Distribution. 

[paintacar]

You are not understanding I don't think. This is all under my 2020 taxes The 1099-R with the 10000 and 1500 withheld and the same tax year asking if I want to pay all of the tax on the 10000 or divide it up, without at any point in regards to it to even ask me if I paid any taxes already on the 10000 or showing that any has been paid I t just asks if i took any withdrawal and how much I withdrew. and in the same 2020 taxes added tax for one third of the 10000 that already had 1500 withheld.

[DanaB27]

For 2020 all you had to do is enter the taxes withheld in box 4 of your Form 1099-R when you enter all your Form 1099-R information into TurboTax. The $1,500 will then be included on line 25b of your 2020 Form 1040. The taxes withheld do not get split up over 3 years and therefore are not entered in 2021 or 2022. Most likely (depending on your tax bracket) you got some of the $1,500 withheld refunded on your 2020 tax return if you only claimed 1/3 of the Covid distribution in 2020. Since the taxes withheld are only applied towards 2020, I usually recommended looking into adjusting tax withholdings if necessary for 2021 and 2022.

Please be aware generally, if you are in a higher tax bracket then the 15% withheld won’t cover all taxes due on the distribution because the distribution is taxed according to your tax bracket.

[Critter-3]

Did you elect to split the distribution over 3 tax years on the 2020 return?  Look at the 2020 return ... do you have a form 8915 ?