I have a cx that purchased a home in 2021 and wants to apply the $10,000 exclusion to the allocation in the current year of IRA distribution taken in 2020 tax return but spread over the 3 years.
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To get the three year spread, they had to have had a hardship because of COVID. If that wasn't the case they fraudulently withdrew the money last year. They can't have their cake and eat it too.
They got the money last year because of financial hardships caused by COVID and now they are saying they stuck the money in their sock drawer to buy a house? I don't think that is how it works.
Understand some of that. They used some of the money to put the down payment on a house in 2020 and then when the house was complete in 2021, want to get the exclusion.
To get the three year spread, they had to have had a hardship because of COVID. If that wasn't the case they fraudulently withdrew the money last year. They can't have their cake and eat it too.
Are you the same person that asked this same thing, here:
My answer there:
The 3-year carryover from a 2020 covid-related distribution will be reported on Form 8915-F, which hasn't appeared in an update, yet.
The penalty waiver for first time home buyer for early withdrawal is Form 5329.
https://www.investopedia.com/articles/personal-finance/110415/can-you-use-your-ira-buy-house.asp
You can use your covid money for anything you want, but that doesn't change the distribution rule it fell under. Spending it on a home has nothing to do with tax reporting for the three-year rule. And, the disaster provision for a home in 2021 has nothing to do with disaster provisions in 2020.
For this: "They used some of the money to put the down payment on a house in 2020 and then when the house was complete in 2021, want to get the exclusion."
Then amend 2020 and refile it, showing the $10k house separate from the Balance as covid distribution. Now that balance is split over 3 years.
Read that article; it will help you determine if they finally qualify under this new concept.
I'm having trouble understanding how you can use the home-buyer exclusion to avoid a 10% penalty that was already avoided when it was a COVID distribution.
"how you can use the home-buyer exclusion to avoid a 10% penalty that was already avoided when it was a COVID distribution."
You can't. That's the point. The same money can't do two things. And 2020 money cannot change purpose in 2021 tax reporting. Home buyer exclusion isn't a deferrable reporting option, either.
You know what they say: Pick a lane.
@qbteachmt wrote:
You know what they say: Pick a lane.
Yep. I said that last night on the way home from dinner (well, more shouted it and there was a good bit of horn blowing as well).
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