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Level 2
February 4, 2021
Solved

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

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?

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Just-Lisa-Now-
Intuit Community Champion
February 4, 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".


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-waived/01/121614#M63123

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♥¸¸.•*¨*•♫♪

17 replies

IRonMaN
Level 15
February 4, 2021

Try form 5329 - exception "other"

Slava Ukraini!
Just-Lisa-Now-
Intuit Community Champion
February 4, 2021
Whos running the counter on this question? We've gotta be getting up there!
♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
sjrcpa
Level 15
February 4, 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.
Intuit Community Champion
February 4, 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". 

taxiowa
Level 8
February 4, 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.

 

ChrisWAuthor
Level 2
February 4, 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".