CARES Act of 2020 or SELF-INFLICTED

[jjf2008]

We had a death in the family in early 2020.  He handled all the financial matters.  With his passing, we suffered financially and had to cash-out an IRA.  The institute withheld 10% of the IRA, and sent it to the Government.  So, when I prepared the 2020 taxes, I knew the CARES Act of 2020 waived the penalty but not the taxes.

On Form 8915-E allows the taxes to be paid over a 3 year period.  There is a block to be checked if you wish to pay the taxes now in a lump sum.  I elected to spread the taxes over a 3 year period.  In preparing the 2021 taxes,  I realized I have a major problem.   That is, the Institute already withheld 10% and sent it to the Government.

I need your help, because the filing date for 2021 is upon us.  I figure that I will have to clean-up my 2020 Return, but I have to get the 2021 taxes filed now.  Can you help me out?

Thank you for your expert help.

[dmertz · Accepted solution]

There is nothing that needs fixing.  Assuming that you entered box 4 of the 2020 Form 1099-R correctly into 2020 TurboTax's 1099-R form, on your 2020 tax return you got credit for the 10% that was withheld and it reduced the amount that you otherwise would have owed as a balance due or it increased your refund.

[jjf2008]

Dear dmertz (level 15):

My God, you have idea how tremendously important your reply means to me and my elderly mother.

I have worried for hours, then days, then weeks, and finally for months on end; in other words, I worried continuously and without stopping.  I could not tell her that I made this error, because she depends on me to handle matters.  So, I held it in not being able to tell her, because she worries every second of the day which would make things worse on us both.

So, when I Thank You for your reply, please believe me: you throw a rope to a drowning man and pulled him ashore.  I will try to go on from here and bandage up my mother’s return.  With time running out, I still must get busy with my own return.   At least, my return is simpler than her’s.

One Million times, “Thank You!”

Bless you,

alan

[jjf2008]

Thank you!

If I may impose upon you to clear things up for me, so I can proceed with completing my 2021 federal tax return.   My questions are: Can I Amend my 2020 Federal Tax Return on my 2021 federal return?  On the 2020 Form 1040-SR, Line 3b called it "ROLLOVER"; then Line 4b: Is 1/3 the amount of the IRA $60K which is $20K from Form 8915-E Lines 17 & 19.  So, going down Form 1040-SR to Line 11 there is the added $20K to Adjusted Gross Income.  There seems no way out, I feel like a mouse trapped in a maze.  I am trying to find a way out, but the water is quickly rising and I fear that I will drown.  Please help!!!

Since, it involves the Government, I am pretty sure that I know the answer to the question. However, you are an Expert in Taxes, I defer to you for help and guidance.

Thank You very much.

AB

[dmertz]

TurboTax has no ability to put the word "ROLLOVER" on line 3b.  Did you mean line 5b, not 3b?  The word "ROLLOVER on line 5b means that you reported a rollover from an employer plan.

Nothing on a 2021 tax return changes a 2020 tax return.

You haven't mentioned anything that suggests that there is something wrong with the 2020 tax return.  Why do you think that the 2020 tax return needs to be amended?

In 2021, Form 8915-F replaces Form 8915-E and is where the calculation will be done to include in income another $20,000 of the 2020 Coronavirus-Related Distribution.

[jjf2008]

My friend,

I am really trying to get it in to my thick head!  But...  I still need to run this by you, the Expert.  We had some tough times and lost a member of our immediate family during the 2020 CoVin-19.  Please help me to  understand the affect of my tax error which I explain below. CARES Act: 

On the 2020 Tax Return, Form 1099-R (Distributions from Pensions, IRAs, etc.) Line 4 (FITW) was 10% of Line 2a (say, $6K).  This was due to COVIN-19. 

So, the Payer (say, XYZ Financial Group) sent the IRS a check for $6K and sent me the rest of the monies ($54K). 

Then on 2020 Form 1099-R Summary, Line 20a (IRA Qualified Disaster Distributions from Forms 8915-B, C, E) an Amount (say $20K) which is ADDED to Form 1040, Line 4b. 

All the  Fed Taxes were PAID ($6K), prior to receiving my monies from XYZ Financial Group ($54K).

2020 Tax Return, Form 8915-E (Qualified 2020 Disaster Retirement Plan Distributions and Repayment), Part II, Line 9 Box was NOT check marked.  No numerical entry is made on Line 9.

2020 Tax Return, Form 8915-E (Qualified 2020 Disaster Retirement Plan Distributions and Repayment), Part II, Line 17 Box was NOT check marked, either.  An entry of $20K is made on Line 17.

2020 US Tax Return, Form 1040-SR, Line 4b (Taxable Amount) (say $20K which is $60K divided 3 yrs from Form 8915-E).

I made an honest mistake by over paying the Taxes.   The monies were withheld and sent to the US Treasury Department. 

Now, I am attempting, with your help, to complete this year's Tax Return (2021), but I believe that my error on 2020 Return will be perpetuated over the next two years.  My taxable income in 2021 is 1/3 less than 2020; however, the amount of monies owed near 50% more.  I made less monies and owe about 50% more in taxes.

If you can help me wrap my head around what needs to be done to make sure the Government gets their share of my monies and I don't over pay portion in taxes.  In 2020, we cashed out the $60K Annuity, PAID the 10% Fed Tax ($6K), Prepared 2020 Fed Taxes and made error, Form 1040, Line 4b, I added $20K to my taxable income and Paid taxes on it.  Now, I cannot figure out how to fix the problem on 2021 Form 8915-F.  In 2021, Form 8915-F will not allow any corrections or changes to be made.  Lines 23 thru 26 have either zero or $20K.  Those numbers appear to be coming from somewhere else.  All the other Lines have no entry. 

Thank you for your help in this matter.  I truly appreciate your time and expertise.

God Bless,

AWB

[dmertz · Accepted solution]

The $6,000 was applied against the 2020 tax liability, increasing the 2020 refund or reducing the 2020 balance due, so the $6,000 has already been credited.  It has no effect on any other tax returns.

Because $20,000 of the Coronavirus-Related Distribution goes on each of the 2020, 2021 and 2022 tax returns, that $20,000 has to be taken into account when figuring how much tax withholding and estimated tax payments need to be made each year.  It's possible that since the $6,000 was entirely credited on the 2020 tax return that there was an underpayment of taxes for 2021 unless estimated tax payments for 2021 were made or tax withholding from other sources was increased.

[jjf2008]

dmertz,

Thank you for giving me additional details.  Your simplifying made it possible for me to understand.  Finally, I understand it. 

I still hate that 22 cents of every dollar is going to Uncle Sam.  In 2021, my taxable income is 1/3 less than 2020, but I am paying 50% more.  Doesn't seem right that I made less monies and owe about 50% more in taxes.

Anyway,  you have helped me so much in understanding my tax situation.  You really have been such a godsend to me because you always provided support and encourage in this tax issue I was having.

Thank you!

God bless,

AWB

[fanfare]

you divided by 3.0 to spread the tax impact of your emergency distribution.

That's supposed to help you.

In the end it doesn't because you now owe tax on $20,000 and will again next year.

[dmertz]

Spreading the $60,000 of income helps in two ways.  You don't have to come up with the money for the tax on the entire $60,000 in the year that you have the unexpected expense that necessitated the $60,000, instead giving you three years to cover the overall tax liability, and by not having to include the entire $60,000 in a single year it's likely that less of it (if any) will fall in a higher tax bracket, resulting in less overall tax liability on the $60,000.

[jjf2008]

Dear DMertz,

Thank you for your very Gracious and Knowledgeable help.  I could not have gotten this far without you.  I hate to trouble you, but the deadline is approaching very fast.

Based on this same model we have been talking about,

1)  On 2021, 1040-SR IRA Distributions Line 4a shows a (Zero) 0; where Line 4b also shows a (Zero) 0 that came from Form 8915-F.   This seems strange since the 2020 Tax Return is as follows:

2)  On 2020, 1040-SR IRA Distributions Line 4a shows $21,935 ($1,828 plus $20,107 ($60,322/3yr)); where Line 4b also shows $21,935 ($1,828 plus $20,107 ($60,322/3yr)); that came from Form 8915-E Lines 17 & 19. 

It looks like something is not correct on missing in 2021.

If you would be kind enough to revisit it and give me your take on it.

Thank you so very much,

AWB 

[fanfare]

Follow the instructions timestamped ‎04-07-2022 9:25 AM

on this thread.

https://ttlc.intuit.com/community/taxes/discussion/re-irs-form-8915-f-not-being-added-to-2021-report...

[jjf2008]

I am having trouble following the steps below.  I did not receive a 1099-R for the IRA that I received during Covid19 - 2nd year of the 2020 distribution.  I try to follow the instructions, but they are not exactly like Turbotax screens that appear.  I need so help, please.

thank you

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You must go to the Retirement Income section of the program for a Form 1099-R to be able to enter your 2nd year of the 2020 distribution -

Click on Federal

Click on Wages & Income

Scroll down to Retirement Plans and Social Security

On IRA, 401(k), Pension Plan Withdrawals (1099-R), click on the Start or Revisit button

On the screen Did you get a 1099-R in 2021? Click on NO, if you did not receive a 2021 Form 1099-R in 2022

[dmertz]

Line 4b of your 2021 Form 1040 should not be zero unless you paid back at least 1/3 of the Coronavirus-Related Distribution after filing your 2020 tax return and before filing your 2021 tax return.  If that's not the case, something is wrong with the way Form 8915-F has been prepared.

[fanfare]

@DoninGA 

Here's somebody who says your instructions don't work -- exactly.

any comment ?