Paying Back Covid IRA Distribution

[Anthony2525]

I took out a Covid distribution from my SEP IRA at the end of 2020 and elected to divide the tax liability over tax years 2020, 2021, and 2022. I just paid back 100% of this distribution (in March of 2022) and now would like to amend my 2020 tax return to get back the federal and state taxes that I paid, as well as to avoid getting taxed on this distribution when I file my 2021 taxes. My IRA is with Fidelity, who told me that they won't be able to produce a form which indicates that I paid this distribution back until early 2023, because "the IRS hasn't yet produced the necessary form for them to send to me." My question is, do I even need a form from Fidelity to amend and refile my 2020 tax return, or can I just adjust my response on the 2020 8915 form to indicate that I have repaid this distribution? Also, can I avoid paying the tax on my 2021 return, once I have amended my 2020 return and import the results into 2021 Turbotax?

[Critter-3]

or can I just adjust my response on the 2020 8915 form to indicate that I have repaid this distribution  CORRECT

[Anthony2525]

I have opened my 2020 return in Turbotax to attempt to amend my return.  Is there some provision in the 2020 forms to indicate that a repayment has been made (other than a repayment which was made prior to the filing due date for 2020), which will recalculate my new 2020 tax liability?  Or do I simply adjust the 1099-R form that I received from Fidelity and let Turbotax recalculate my tax liability due?  I had a significant amount of federal and state withholding made on the 1099-R that the distribution was made with, so I can't simply delete the 1099-R form and expect Turbotax to recalculate my tax liability accurately.

[DaveF1006]

 To clarify, when and how did you make the repayment?

[Anthony2525]

I made the repayment on March 1, 2022.  I have not yet filed my 2021 taxes.

[DanaB27 · Accepted solution]

Since you paid 100% back in 2022 you will have to carry back some of the repayment to 2020 by amending your return:

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”
4. If you do not have any 1099-R answer "No" to "Did you get a 1099-R in 2021?"
5. Click "Edit" on the “Your 1099-R Entries” screen
6. Continue through the questions until "Did you repay any of this distribution" and select "I repaid part of the distribution"
7. Enter the amount of repayment allocated to 2020.

You will file Form 8915-F to enter the repayment on your 2021 tax return once the form is available in TurboTax. Please see IRS forms availability table for TurboTax individual (personal) tax products for additional information.

For the IRS:

"If you make a repayment after the due date of your 2020 return (including extensions) but before the due date of your 2021 return (including extensions) and you have spread the income over 3 years, include the repayment on your 2021 Form 8915-E. However, you may file an amended Form 8915-E for 2020 if either of the following applies.

• You elected on 2020 Form 8915-E, lines 9 and 17, as applicable, to include all of your qualified 2020 disaster distributions in income in 2020 (instead of over 3 years).
• You have spread the income over 3 years, the amount of the repayment exceeds the amount of your qualified 2020 disaster distributions that are included in income on your 2021 Form 8915-E, and you choose to carry the excess back to 2020. See the example below.

Example

You received a qualified 2020 disaster distribution in the amount of $90,000 in 2020. The distribution was made on October 16. You choose to spread the $90,000 over 3 years ($30,000 in income for 2020, 2021, and 2022). On November 19, 2021, you make a repayment of $45,000. For 2021, none of the qualified 2020 disaster distribution is included in income. The excess repayment of $15,000 ($45,000 - $30,000) can be carried back to 2020. Also, instead of carrying the excess repayment back to 2020, you can choose to carry it forward to 2022."

@Anthony2525

[Anthony2525]

It appears that the 2021 Form 8915-F won't be available in Turbotax until March 24, so I will hold off on filing for 2021 until after that date. I did file an amended 2020 return, eliminating one-third of the distribution amount from my gross income and reducing my 2020 tax liability.  The IRS indicated that it may take 16 weeks to receive the resulting refund for 2020.

[Caseyblue]

I repaid 1/3 last year & will report 2nd repayment on this year’s return.

When do I need to make that repayment by?

[Anthony2525]

If you pay the second 1/3 before you file your 2021 taxes, I believe you would be able to exclude this amount from taxation on your 2021 filing. If you paid taxes on the first 1/3 on your 2020 filing, then I believe you can amend your 2020 return, eliminating this income from that return as well.

[Caseyblue]

So 2nd repayment would need to be made by April 18th filing date?

[Anthony2525]

Yes, that is my understanding, if you want to avoid paying tax on the distribution on your 2021 tax return. After that date, you would have to claim it in 2022, if you only pay back two of the 1/3 amounts.  If you pay back the remaining balance of the Covid distribution after April 18, you would need to amend your 2021 filing to claim the refund, and you would also avoid paying the related tax on your 2022 return.

[greglucas001]

Hi, I'm still confused as to how this is administered to the 401k provider. In my case, I changed employers and the 401k with the former (fidelity) was distributed. $12k and I kept it as a covid distribution to be taxed over 3 years. I am with a new employer and new 401k provider (schwab). How do I 'pay it back'?  If I simply withhold the funds from my check it goes into pre-tax as current year contributions to the 401k.. If I report part of that on my 8915-F as paid back, I would also have to reduce the amount in 12b code D on my W-2, I believe. This doesn't feel right, so I'm still not sure how to handle still.

[NCperson]

@greglucas001 - suggest talking to Schwab on how to 'pay it back'....... because the cash mechanics have to be between you and them......

[fanfare]

If Schwab allows the repayment into your 401k, there will be a form with "Repayment of coronavirus-related distribution" as an option for you to mark.

You must repay by sending in a personal check.

OR

You can repay into an existing or new Traditional IRA if you find that preferable. 

.

@greglucas001 

[Critter-3]

"If I simply withhold the funds from my check it goes into pre-tax as current year contributions to the 401k.. If I report part of that on my 8915-F as paid back, I would also have to reduce the amount in 12b code D on my W-2, I believe. This doesn't feel right, so I'm still not sure how to handle still."     It doesn't feel right because it is not right ... you cannot repay the distribution this way.