1099R Coronavirus Exception Issue

[bpaulg]

On my 1099-R I took a 32K gross distro for coronavirus distro exception in 2020. Vanguard mixed the sources from the 401k traditional and 401k roth onto one 1099R

7421.62 is taxable from a traditional 401k (box 2a)

24,578.38 is from Roth 401k; so Box 7 is 1B

Turbo tax is not allowing me to indicate this is coronavirus distro so that i can waive the 10% penalty on the 7421 because it sees 1B in box 7. So it thinks the whole thing is Roth I guess? The turbo tax rep wasn't sure either. She thinks it should be split out into two. So it doesn't let me select that this is for Coronavirus exception.

It DOES however, take me to the screen where I can choose OTHER REASON for not paying additional tax, and I can enter the amount there (below is what it says). But this doesnt indicate its for Coronavirus.

My question is, could I split out the 1099R into two 1099Rs (even though I have just one) and separate out the 24,578.38 on its own, and the 7421 on its own, so that Turbo Tax can pick up on the 7421 being its own traditional 401K taxable and ask about the Coronavirus Exception??

Other reasons for no additional tax on your early retirement withdrawal

If you took the money out,

• When you were older than 59 1/2 ,

• From a section 457 plan that you didn't roll over from another qualified retirement plan, or

• From ESOP employer stock dividends,

Then, enter the dollar amount next to Another Reason. You may not need to pay additional tax on your early retirement withdrawal.

[DanaB27 · Accepted solution]

Yes, if you use TurboTax Online then your code 1B will not trigger the COVID distribution question. Please see @dmertz workaround below how to enter it in TurboTax Online. Or you will have to switch to the TurboTax Desktop version, there you are able to enter the 1099-R as it is and get the COVID distribution questions.

Please follow these steps from dmertz to enter your 1099-R:

1. Login to your TurboTax Account 
2. Click on the Search box on the top and type “1099-R”
3. Click on “Jump to 1099-R” and enter all 1099-R information, enter code "1" but do not enter code "B" in box 7
4. Continue until "Tell us if any of these uncommon situations apply" screen
5. Select "I took out this money because of a qualified disaster (includes COVID-19)"
6. Answer all questions in regards to the COVID distribution to trigger that you qualify for the Qualified Disaster Retirement treatment.
7.  On the “Review your 1099-R info” screen click "edit" and add code "B" to the 1099-R Form entry.
8. When you continue the COVID questions are still accessible

You can choose to have the distribution taxed over 2020, 2021, and 2022 instead of only in 2020. You’ll have three years to pay back the funds you withdrew, without the amount impacting that year’s cap on contributions. If you pay back the amount within that time, you’ll be able to claim a refund on those taxes paid when you file an amended tax return. Please see IRS Coronavirus-related relief for retirement plans and IRAs for more details.

Please see How do I switch from TurboTax Online to the TurboTax software? for additional information.

[Edited 2/28/2021 | 5:00am PST]

@bpaulg 

[dmertz · Accepted solution]

This Form 1099-R is reporting that the entire distribution is from the Roth 401(k).  None of it was from the traditional IRA.

The CD/download version of TurboTax correctly asks if a code 1B distribution was a coronavirus-related distribution but the online version of TurboTax fails to do so.

@DanaB27 , perhaps you could notify Product Quality or a forum administrator about online TurboTax's failure to ask if a code 1B distribution is a CRD.

[bpaulg]

@DanaB27     

So @dmertz  is right.  The taxable amount in 2b is the earnings from the roth 401k.  

And to make it more complicated, I failed to mention I did have an actual second 1099-R for a 4K distro from the traditional 401k, where it was just #1 in Box 7 and it asked me for the coronavirus exception.  

SO this second one that is just the Roth 401K distro with the taxable amount in 2b, should I still split it out using the online version into a third 1099-R to make one for Box 7=1 (taxable amount)  and one for Box 7=1B for the distro i wasnt taxed on?? 

[dmertz · Accepted solution]

No, you do not split the code 1B From 1099-R.  It must be entered whole.

I think I have a workaround to get the code 1B Form 1099-R entered as a CRD.  Enter the code 1B Form 1099-R as received, except omit the code B, select only code 1 (or edit your existing entry to remove the code B).  Complete the entries, indicating that the distribution was a CRD and that you qualify.  Finally, edit this Form 1099-R and add the code B.  The CRD information will remain.  If you need to change any of the CRD information, perhaps due to paying back a portion of this distribution before filing, you'll need to edit, removed the code B, make the changes, edit again and add back the code B.

[bpaulg]

@dmertz    WoW!  I will try that.  That sounds like it will work better than splitting it out.  Really appreciate the suggestion.  Ill try here in a bit and let you know. Thanks.

[bpaulg]

@dmertz @DanaB27    That worked dmertz!  I created it with just code 1 in box 7, got it to pick up on the COVID exception, then went back in and changed it to code 1B.  Proceeded and it kept everything.  Crazy that work around.  Sounds like a Request for Enhancement is needed to prevent this!  Thanks so much! You all ROCK!