Form 8915-E Care Act. How do I complete so I don't pay any taxes?

[TinaW65]

"Plan participants could withdraw up to $100,000 from their accounts and recognize it in income over a three-year period for tax purposes. They were also given three years to replace the withdrawn money to the account without any penalties or taxes owed."    So, what is the process within TurboTax so I don't pay any taxes this year on my distribution?  

[KathrynG3]

Form 8915-E will be completed automatically based on how the interview for Form 1099-R is completed. Only the early withdrawal 10% penalty will be completely waived.

You still have to pay taxes if the distribution has not been returned yet. If the money is repaid by December 31, 2022, then the IRS advises to amend 2020 and 2021 to get refunded for any taxes paid.

To report the distribution in TurboTax, follow these steps:

• Search for 1099-R. Select the Jump to link in the search results.
  • Verify that the questions were answered after entering Form 1099-R: 
    • Where is your distribution from?
      • Pension/IRA distributions received before retirement age / None of the above
    • Do any of these situations apply to you?
      • I took out this money because of a qualified disaster (includes COVID-19)
  • Continue through the rest of the questions before returning to your state return and go through any questions there. Some states are taxing the entire distribution in the year the distribution was received. 

For more information, see: 

What is Form 8915-E Qualified 2020 Disaster Retirement Plan Distributions and Repayments?

Coronavirus-related relief for retirement plans and IRAs questions and answers, see question/answer 3.

[TinaW65]

Hi Kathryn, thank you, but my situation is different.  The situation is regarding a 401K loan from a former employer-plan.  The employer-plan has allowed for former employees to take COVID loans out during 2020 on a 3-year repayment schedule.  No taxes and full repayment allowed.  I did get a 1099-R and instructions to complete form 8915-E to avoid taxes, but I don't know how to fill out the form to prevent taxation via TurboTax.  Again, I do not have to pay taxes at all.

[LinaJ2020]

The same relief applies to loan repayment. 

If you lost your job or experienced hardship due to COVID-19, the unpaid 401-K loan balance may qualify as a COVID-19 distribution. The New COVID-19 Relief package allows this distribution for a greater flexibility as far as how income taxes are paid.  You may be allowed to have an additional year to repay the loan, or upon the distribution, you will not be subject to the 10% early withdrawal penalty, and may be "recontributed" for up to three years. 

Before Covid, if you do not repay the loan, it will be treated as a taxable distribution income and subject to 10% early withdrawal penalty if you are under age 59 1/2. 

For more information, click on these links:

Delay repayment

Covid 19 tax treatment

In TurboTax online,

• Sign in to your account and select Pick up where you left off
• From the upper right menu, select Search and type in 1099r and Enter
• Select the Jump to 1099r
• Follow prompt
• On screen," Do any of these situations apply to you?" select the first one related Covid
• On screen," Any Periodic Payments?" select No
• Next screen, " Was this withdrawal due to Covid 19 or a Qualified Disaster Distribution?" select Yes, follow prompts
• Next screen," Did taxpayer repay any distribution?" select Repaid all of the distribution
• Next screen," Does taxpayer want to pay all the tax this year?"
• Follow prompts

The total distribution amount should show on line 5a of your Form 1040.  It is only for reporting purposes.  It is not taxable.  The 1/3 portion should show on Schedule 1 as other income.  

"For example, if you receive a $9,000 coronavirus-related distribution in 2020, you would report $3,000 in income on your federal income tax return for each of 2020, 2021, and 2022. However, you have the option of including the entire distribution in your income for the year of the distribution."

@TinaW65