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@alexM12 wrote:
This post is very helpful, but I'm still unclear as to whether TurboTax has resolved the issue related to Covid distributions or not. thank you
Resolved what issue?
should i enter or ingored the code on 1099r box 7 and submitted form 8915e so i dont pay the 10% for being under age
does my payer have to send a corrected copy with a different code in box 7
No, use the code as noted on your 1099-R. The exception to the penalty will apply when you fill out form 8915-E.
i took a 401K withdrawal in 2020 and returned the money, but not within 60 days. I was laid off due to covid, and understand that there is an exception that would allow me to not claim the distribution as income. How do I report this?
Enter the 1099-R and say that it was COVID related and answer the questions that it was returned.
How can I avoid the 20% tax penalty when liquudating 401k at age 62?
@Cboykin2314 wrote:
How can I avoid the 20% tax penalty when liquudating 401k at age 62?
There is no early distribution penalty since you are older than 59 1/2. The 20% federal income taxes withheld on the distribution is required on a withdrawal from a 401(k) retirement account.
If the withdrawal was due to Covid-19 you have the option to spread the amount withdrawn over three years, 2020, 2021 and 2022. The total amount of federal taxes withheld can only be reported on the 2020 tax return, those taxes cannot be spread out.
A code of 2 in that box was not an option when I took the distribution because the COVID exception rules has not yet been published. Do you anticipate the new IRS form will allow for an option if that distribution code is a 1?
If you have a 1099-R for a Retirement Plan Distribution, with a Code 1 in Box 7, there are exceptions to the 10% Penalty for Early Distribution.
Click this link for more info on the Penalty Exception.
The Covid rules allowed you to report the income in Box 1 of your 1099-R over a 3-year period (without penalty) for 2020 distributions only.
The IRS has not yet finalized whether this will also apply to 2021 distributions, since legislation is still pending on this issue.
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