Hello,
I took out 40k on a 401k withdrawal last year due to Covid. TurboTax now allows me to input my 1099-r as a Covid withdrawal and split it up into 3 years.
my issue is I withheld $4,000 federal taxes (10%) when I withdrew it. Is there a way to split my withholding into 3 years as well? It seems to be splitting my withdrawal 3 ways ($13,333) but having my entire withholding only be on this years taxes. So I’m getting a ton back this year but I assume my next 2 years won’t be so nice.
Thankyou in advance! Hopefully I’m just missing something.
As @LOrtmann suggests, you can elect to have part or all of your oversized 2020 tax refund applied to pay down next year's taxes. The IRS will just keep whatever you direct them to keep. You can do that in the "Other Tax Situations" tab.
No. The federal taxes withheld are not split. They are entered as a tax payment on the 2020 federal tax return on Line 25b
If you make the election, you paid 3 time more withholding this year on that so you get 2/3rds back, on paper. you have to manage your taxes via estimated payments over the next two years.
Some people won't be able to do that.
Thanks I just wanted to make sure I was not missing something. Yeah I’ll have to up my federal withholding at work to prepare for the next couple years. I think it will still be better than being but in a higher tax bracket this year if I pay it all
Going to submit my taxes. So I’ll get a large refund this year but for the following 2 years I need to prepare and have more taxes taken out if I am correct. Anyone else have this issue?
I don’t quite understand? What do you mean apply the refund next year?
As @LOrtmann suggests, you can elect to have part or all of your oversized 2020 tax refund applied to pay down next year's taxes. The IRS will just keep whatever you direct them to keep. You can do that in the "Other Tax Situations" tab.