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State impact of Form 8915 Disaster Distributions

SOLVEDby TurboTax145Updated March 22, 2022

IRS Form 8915 reports distributions from retirement plans due to qualified disasters and allows you to spread the taxable portion of the distribution over three years, providing some relief, if needed, in the year of the disaster. It is also used to report repayments, which could help you to avoid being taxed on the distribution should your situation improve.

Form 8915-F allows taxpayers who withdrew retirement funds due to the coronavirus to take advantage of this. Additionally, the form will be filed in 2021 and 2022 to report the 1/3 taxable portions of the 2020 distributions (reduced by any repayments of the 2020 distributions you make).

Right now, states are deciding whether or not they'll treat these distributions the same way as the IRS, taxing them over three years, or taxing them entirely in the year they were withdrawn. We are continuously monitoring every state’s approach to Form 8915, and will update TurboTax as soon as possible.

If you’ve already started your return and have seen a screen indicating you may need to adjust your state taxable amount, it's likely because your situation isn’t ready yet. From here, you can calculate the state amount, enter it yourself, and file your return. We will continue to roll in more updates in upcoming releases.

Many states have deductions from income for certain types of distributions, such as railroad retirement and military or other government pensions. If only a portion (for example, one-third) of the taxable amount of the distribution is included in income each year, then generally only the corresponding amount of the deduction (one-third) can be taken for each year.

Note: the retirement area of taxation is very complex, and because this form was released late in the tax year, it might take us a while to fully implement the changes required across our federal and state products.

Therefore, we are taking a phased approach to doing these program updates, prioritizing the most common situations so that we can maximize the number of people who can file their tax returns.

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