Amending 2020 Taxes & Eligible Repayment of Qualified 2020 Distributions

[Ajohnson2252]

I just realized that I did not report my Form 1099-R from a 2020 IRA distribution in my last year’s tax return. (Covid-19 job work hour reduction.)

I will now need to amend my 2020 tax return and submit my 2021 return at pretty much the same time. When I do that, will I be able to mail out the 1040X and add on the Form 8915-E  to correct everything? 

Also, in regards to repayment of a qualified distribution, my traditional IRA was closed out early 2020, distributing the full amount <$3000 at the time. In July 2021, I opened a NFCU Roth IRA CD and Fidelity Roth IRA and contributed >$5000, would that be considered an eligible repayment that I can list on my 2021 tax return that I will be filing electronically? (401k contributions started being made again around that time, if I’m able to include that as repayment….?)

Of course, this would mean the 2021 return would be received before my 2020 amended forms declaring the initial 2020 1099-R distribution has been processed by the IRS. 

Please direct me in the best course of action as this has instantly become very cumbersome.

Thank you!

[ThomasM125]

You will be able to mail out the form 8915-E with your amended return. The form 8915-E will be generated on your amended return if you indicate that you will spread your tax payment over the three years allowed. 

Since you withdrew money form a traditional IRA account and then put it into a ROTH IRA, that will not qualify as an allowable recontribution. This is not explicitly stated in IRS notice 2020-50, but I assume this is so since you have to pay tax on the traditional IRA distribution as you would have to have done if you did a ROTH IRA conversion. So, there would be no tax advantage to recontributing the funds.

The 401-K contributions aren't going to work as a recontribution, since they will be reflected on your 2021 tax return as a reduction in your wages as reported on your W-2 form. As such, they will reduce your tax income in 2021, but to report the recontribution, you would need to report it on your 2020 tax return, so there would be a duplication in reporting. However, you may want to talk with your employer to see if there is anyway they could not report the 401-k contributions on your 2021 wages, but I don't think that is possible.

You can read more about this in IRS notice 2020-50 here  IRS notice 2020-50. 

[Ajohnson2252]

Great information - thank you!

Last question: once I have sent off the amended forms, will I be able to go ahead and file the 2021 taxes at the same time with the 2nd 1/3 report or should I just file for an extension and wait for the amended tax to be confirmed and complete by the IRS to file my 2021 tax return?

[ColeenD3]

You do not need to file an extension. By filing the amended return, you have done what you needed to do. You can file your 2021 return now.

[fanfare]

"Of course, this would mean the 2021 return would be received before my 2020 amended forms declaring the initial 2020 1099-R distribution has been processed by the IRS. "

Note there is a huge backlog of paper returns and amended returns for 2020 and now 2021.

The simplest solution is to not divide your 2020 distribution in three parts for 2020 when you amend.

Then you will not have any contradictions by submitting your 2021 tax return now.

You won't need 8915-F unless you are taking another disaster distribution in 2021.

If you are not getting any refund(s), it doesn't matter how long IRS takes to approve your tax returns.

[fanfare]

Dividing 2020 by 3.0 now hardly helps you since you have to pay

the first third now and second third by April 18th,

That leaves you with additional tax in 2022 on the last third 

[Ajohnson2252]

Thanks - yea that’s what I’m going to do instead definitely makes the most sense.

[CSKcpa56]

Wouldn't you file the 1040X electronically on the IRS website? 

Now available: IRS Form 1040-X electronic filing | Internal Revenue Service