Re: 10% Penalty on IRA/401(k) with CARES Act

ChrisW · ‎02-03-2021

The CARES Act stated that any IRA/401(k) early withdrawals would not be subject to a 10% penalty if under $100,000. ProSeries is currently calculating the 10% penalty. Has anyone else run into this? Is there some sort of box we have to check that I cannot locate?

IRonMaN · ‎02-03-2021

Try form 5329 - exception "other"

Slava Ukraini!

Just-Lisa-Now- · ‎02-03-2021

Whos running the counter on this question? We've gotta be getting up there!

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

garman22 · ‎02-03-2021

I believe you meant to say Corona related distributions......"any" distribution would not qualify. If you or your client qualifies, use 5329 to offset the penalty under "other".

sjrcpa · ‎02-03-2021

With all the COVID changes, we may not have enough counters. Can we get some more from the ACME catalog? I'll chip in some of my old points.

The more I know the more I don’t know.

abctax55 · ‎02-03-2021

I'm happy to donate some/all of mine too. Well, maybe not all as I suspect we will need to upgrade the "why can't we efile yet" counter. We still have 8 days to go on that one.

HumanKind... Be Both

IRonMaN · ‎02-03-2021

Counters are on back order at ACME ---------------- they have been selling like hotcakes this year.

Slava Ukraini!

sjrcpa · ‎02-03-2021

Thanks for being proactive on this.

The more I know the more I don’t know.

taxiowa · ‎02-03-2021

Yeah, only covered individuals qualify. You can't take money out to buy a house or boat and qualify for 10% exception. Bunch of financial people were telling people there is no penalty for distributions under 100K. But that is not the case.

ChrisW · ‎02-04-2021

The person qualifies. I would have thought Intuit would have done a better job with a separate box for the CARES Act, but I guess not. Looks like I will use "Other".

Just-Lisa-Now- · ‎02-04-2021

By the IRS instruction Covid related distributions should be reported on the 8915E not just the 5329, there's a few other threads on this.

https://proconnect.intuit.com/community/proseries-tax-discussions/discussion/re-10-early-withdrawal-...

if you look at Notice 20-50 bottom of page 11 it says:

A qualified individual receiving a coronavirus-related distribution is entitled to the following favorable tax treatment with respect to the distribution by reporting the distribution on the individual’s federal income tax return for 2020 and on Form 8915-E, Qualified 2020 Disaster Retirement Plan Distributions and Repayments (or if there is no federal income tax return for 2020, by filing just Form 8915-E).1 First, the 10% additional tax under § 72(t) (including the 25% additional tax under § 72(t)(6) for certain distributions from SIMPLE IRAs) does not apply to any coronavirus-related distribution.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

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ChrisW · ‎02-04-2021

Thank you. I took a CPE course on the tax changes. The 10% waiver was briefly mentioned but not the 8915-E Form so reference to that helps. Of course the form is not finalized so I am on hold with the return. I also found the check box on the Corona-virus related distribution under the Qualified Disaster relief area.

karekjb7 · ‎02-27-2021

Just be careful clicking the disaster relief because in ProSeries it removes 2/3 of the distribution to be taxed over the next few years and if your client wants to just get the tax over with this year that could be a big mistake!!