2020 1099-R Covid Distribution

[REFUNDMN]

I have a client who did not use my wonderful service for tax year 2020 and went elsewhere.  Nevertheless, they have a 1099-R of $25,000 that was taken because of Covid-19. They were told they have up to 3 years to add this to their income.  For tax year 2020 they did not include any of this money as income and for tax year 2021 & 2022 they want to add $12,500, respectively.  They have a letter from their employer stating this is possible.  I though this had to be spread evenly over the 3-year period.  Any thoughts.  Thanks.

[rbynaker]

You're correct.  They have 3 years to REPAY this amount.  By default the income is spread 1/3 each year for 2020, 2021 and 2022.  There was an option to opt-out of the three-year spread by making it all taxable in 2020.  If this former-future-former client wants to argue with you, send them packing.  Life's too short.

[IRonMaN]

They packed up and left once.  Pack them a sandwich this time and maybe they will be gone for good.  Folks that know so much about taxes should really prepare their own returns ------------- let them deal with those IRS notices themselves.

[abctax55]

Either they "heard" wrong, or their employer is completely wrong.  And if the employer, s/he/it should bear the consequences of giving out bad tax advice.  As in, pay the penalties as well as the cost for amending the 2020 returns.  The prior preparer ALSO has culpability.

[gma]

I had a new client in the opposite sense.  I spread her 1/3 payment just to give her an idea of what she was looking at as far as tax liability.  I told her this may take some time for the 8915E or 8915F (I am still unsure what we are waiting for).  She came and picked up her papers and told me I was taking too long to complete the return.  Someone gave an explanation on how to fix this but it was dated June 2021.  If it is already acceptable to send in the 1/3 payment returns in an acceptable manner please tell me.  Thank you.

[IRonMaN]

It isn't

[qbteachmt]

"For tax year 2020 they did not include any of this money as income"

Get their 1099-R. The employer perhaps considered 2020 a Loan from the retirement plan, and put out a 1099-R for 2021? You have to confirm = make them prove it. And of course, that changes what they are telling you about this being covid-related.

"who did not use my wonderful service" <== love it!

"I am still unsure what we are waiting for"

8915-F. F = Forever form. For Disaster years 2020 and later, for Tax years 2021 and later.

"If it is already acceptable to send in the 1/3 payment returns in an acceptable manner please tell me."

Heck, you can make the payment any time. The Return isn't ready, until the Form is ready. It seems she really wants to make that payment.

[REFUNDMN]

Client wants to know (as well as I), when we amend the 2020 to add $8,333 on the tax return can the remaining $16,667 be added to the 2021 tax return?

[gma]

I was just thinking.  Because they are taking their sweet time on getting this form to us.  Does anyone feel the IRS may delay the 2021 payment and defer 2nd payment to 2022 and 3rd payment to 2023?   

[qbteachmt]

"Client wants to know (as well as I), when we amend the 2020 to add $8,333 on the tax return can the remaining $16,667 be added to the 2021 tax return?"

I am sure the IRS would love to have all the rest of their tax money in year 2 🙂

[qbteachmt]

"Because they are taking their sweet time on getting this form to us. Does anyone feel the IRS may delay the 2021 payment"

The IRS released the draft of the form last Sept. They released the final about 2 weeks ago. Intuit then has a bit of time to create their programming version and get approval, before releasing it.

I doubt the IRS will change tax filing just to help out Intuit. Nice thought, though.

[gma]

Thank you so much.  I have many frustrated clients, just like last year for the split on these withdrawals.

[gma]

Ok, now I am really pissed.  I talked to a colleague who uses Wolterskluwer with tax wise (as he said it). He says he has been doing 8915E's and/or 8915F since February.  There was a hangup on state but that was it.  How did Proseries drop the ball?  I am also interested if Lacerte program has been able to process.  I always considered Proseries as Lacerte's little brother.  And furthermore, if turbotax (all Intuit products) is up, I think this a major screw up.  I am not even convinced once the update is done what we are supposed to do to complete it.  Just my take.  Sorry for the rant.

[rcooley25]

I could think of a better word to use other than screw up but I dont think we are permitted to use such language with our little group of chat  folks.

[rcooley25]

What type of preparer did your client go to last year. Talk about someone who does not know what they are doing.