401(a) early covid related withdrawal has wrong tax amount

[Shannara]

I did an early covid related withdrawal last year. Tax amount is 10%. There's no penalty for covid related withdrawals. Turbotax added an additional 10% penalty for the withdrawal. This is for the online version.

The other issue with Turbotax's 1099-R section is that there is no option for "Alaska" in Box 15. 

I hope turbotax fix their software before the IRS starts processing taxes.

[CatinaT1]

You will report this on a Form 8915-E.  The IRS has not yet finalized the Form 8915-E for retirement plan distributions under the CARES act.  So this form cannot be included in the TurboTax program.  You will not be able to proceed until the form is available.

The IRS has not communicated when the form will be finalized for inclusion on the 2020 federal tax return.

We estimate it will be sometime in February 2021 before the form is available.  You can watch this link for the form availability.  Currently, the form is not listed here since there is no estimated date.  Once there is, you will find the form listed with the date available.  

IRS forms availability table for TurboTax individual (personal) tax products

Additionally, the IRS will not start processing returns until February 12, so waiting for this form is not slowing down the processing of your return.

Please sign-up here and we will email you once the form is live.

Alaska does not have state income tax so you do not need to enter box 15.

[Shannara]

Thank you for that information (both pieces). I noticed the 8915-A (not E) is not supported for e-file. Do you know if the 891-E will be supported for eFile, or I would have to print and mail in?

[DawnC]

We do not yet know if e-filing of Form 8915-E will be supported.  At this point and time the Form 8915-E (Qualified 2020 Disaster Retirement Plan Distributions and Repayments (Use for Coronavirus-Related Distributions)) is not finalized.  We currently do not have an estimated date when the form is ready.

Please sign-up here and we will email you once the form is live.

Those who qualify as individuals directly impacted by the pandemic will be able to withdraw up to $100k from their retirement accounts without facing the 10% early withdrawal penalty.

You qualify if:

• You, your spouse, or your dependent are diagnosed with COVID-19
• You experience adverse financial consequences as a result of being quarantined, furloughed, or laid off
• You had work hours reduced to COVID-19
• You’re unable to work due to child care closure or hour reduction

The distribution would be taxed over 2020, 2021, and 2022. You’ll have that time to pay back the funds you withdrew, without the amount impacting that year’s cap on contributions, and if you pay back the amount within that time, you’ll be able to claim a refund on those taxes.   

[Shannara]

I truly hope this will happen on Friday. Looking at the previous years all the way back to 2016, Turbotax decided -not- to support any 8915 forms. This is surprising as it's been over 4 years to get the first (A) forms into the online software. While I hope Turbotax will actually add the forms to the software, history shows that turbotax has no interest in this form.

[Shannara]

With no update on here, I wanted to forward the update TurboTax emailed me. In short, you can start filing via TurboTax on 2/24. Below is the response:

Hello,

There’s an update on a TurboTax help article you’re following: "Why am I getting getting a 10% penalty on my 1099-R when I withdrew fund during Covid? (Form 8915-E)".

Form 8915-E, which is used for COVID-related early distributions, will

be e-fileable starting 2/24.

We know it’s frustrating to encounter problems like this. Thanks for your patience while we investigate and work on this issue.

If there’s something else we can help you with, ((link removed due to forum bugs))

Thank you,

The TurboTax Help Team

[LinaJ2020 · Accepted solution]

The issue has been submitted and is currently under investigation.  Please click on the following link and sign up for an email notification when it's fixed.  

Form 8915-E

Thank You for your patience

If you are under age 59 1/2, the distribution from the retirement plans and IRAs is considered as an early withdrawal.  Generally, you will pay both regular tax plus an additional 10% penalty of your entire distribution unless you met certain criteria.  Due to the CARES Act, if your retirement distribution is related the Covid-19, you will not be liable for this additional penalty.  You will still pay the normal taxes like your wages and income.  For more information from the IRS, click here: Covid Relief.  If your distribution is not related to the Covid, you will need to pay the penalty.  

As of today 2/12/2021, IRS just completed it's final development of the form.  

The Form 8915-E is available if you are going to download to complete on your own from the IRS website.  However, e-filing is different.  Once the form is finalized by the IRS, it has to be coded into the special language the software uses and has to be thoroughly tested for calculations and e-filing acceptability.  IRS then has to approve it for e-file.  It always takes a little longer for a form to become available for e-file in a software program.  I hope this helps you understand the situation.   

[Shannara]

Nvm. It’s available for the online version now.