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early withdrawal penalty covid

Forum|Forum|5 years ago
February 27, 2021
2 replies
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Hi! I installed the greatly awaited (Covid Related) updates. Revisited the Retirement withdrawal section and it didn't reflect the covid relief or tax break. Its still indicated that my tax bill could not be lowered. Please advise. Thank You!!!

Best answer by DawnC

Have you gone back through the 1099-R screens by editing your 1099-R in TurboTax? You have to 'edit' the 1099-R even if you are not actually changing anything to get the covid questions. If you still don't see them (they are there now), delete the 1099-R and re-enter it.

DawnCAnswer

Employee

Have you gone back through the 1099-R screens by editing your 1099-R in TurboTax? You have to 'edit' the 1099-R even if you are not actually changing anything to get the covid questions. If you still don't see them (they are there now), delete the 1099-R and re-enter it.

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J

jm7777Author

Thank You!! It worked!!

If i don't choose the option to pay all the taxes now, it will default it to pay spread out for 3 years? Or do I have to just pay a third of what's due separately? coz it just game an option to pay all now.

DawnC

Employee

That is correct - If you choose the option to pay it all now, it won't be spread over three years. If you choose not to pay it all now, TurboTax will use 8915-E to spread the tax over 3 years, equally over 2020, 2021, and 2022. You can verify this by looking at the taxable amount on your Form 1040 - it should be 1/3 of your distribution if you elected to spread the tax.

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J

jls22

We have not yet paid back any of our early withdrawal, but are saving so that we will. Is there any way to not pay tax on it this year? And if we do choose to spread the tax out over 3 years, will we be credited back once we do repay?

Thank you.

DMarkM1

Yes, to avoid paying tax on the distribution this year you need to repay the entire distribution. Other than that, you will pay at least some tax this year.

You can pay all the taxes this year and avoid the taxes in the future years.

If you pay back some of the distribution that will reduce the total distribution. Which you could then spread that reduced distribution amount over the three years reducing the tax this year.

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