Partial Coronavirus Related Distribution repayment treatment

[amsync]

Hello, any help is appreciated. I am looking an answer on a specific question regarding CRDs: if I took a $30,000 CRD distribution in 2020 and elected to pay tax over 3 years. And, I paid taxes on $10,000 for 2020 taxes. If I now pay $10,000 back into my 401k in 2022 but before I file my taxes for 2021 in April, do I owe any tax liability for my 2021 taxes? In other words, do 2022 repayments done before you file your 2021 taxes count as 2021 repayments and does a partial repayment exactly for 1/3 of the CRD eliminate the tax liability entirely for that tax year?

[MaryK4 · Accepted solution]

Yes, as long as the repayment is made before the due date of the taxes (including extensions so you could file for the extension and have until October to repay for 2021 tax year).

If a qualified individual includes a distribution ratably over a 3-year period and the individual recontributes any portion of the distribution to an eligible retirement plan at any date before the timely filing of the individual’s tax return (i.e., by the due date, including extensions), the amount of the re-contribution will reduce the ratable portion of the distribution that is includible in gross income for the tax year of the filed return.  (See Coronavirus-related relief for retirement plans and IRAs and 4E in n-05-92.pdf - Internal Revenue Service)