Level 6

Question

Defer Only Part of Corona IRA Distribution

Forum|Forum|5 years ago
March 1, 2021
13 replies
82 views

Client took $95K from IRA as Corona distribution.

He only wants to claim $50K as eligible for deferral and spread over 3 years.

When I read the IRS instructions for Form 8915-E it states that the FULL amount of any 1099-R Box 1 income is to be reported on the form in Part I, Line 2, Column a. Then, the Qualified distributions are to be reported on the form in Part I, Line 2, Column b.

PS does NOT fill in Column a with the total amount distributed unless you mark the 1099-R worksheet as if the entire distribution (Qualified Disaster Distribution Smart Worksheet Line B) is qualified. When doing so, both columns become $95K from my example.

If you fill in the amount of what you want to spread over 3 years ($50K in my example) in that Smart Worksheet, PS will only put $50K in column a. That is not what the instructions say to do.

Am I missing something in PS or is it not set up correctly?

Thanks in advance!

ProSeries Professional

This topic has been closed for replies.

Just-Lisa-Now-

Intuit Community Champion

On the 1099R worksheet, you can choose entire amount, or you can enter an amount....cant you just input the 50k there?

That means in 2020 he'd pay tax on 45k + 16,667 (1/3 of the 50k), then only 16,666 in 2021 and 16,666 in 2022.

Is that not how it works out?

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

M

msmith7305Author

Level 6

Lisa -

Yes, you can enter the $50K in the line of the Smart Worksheet, but if you do, the $50K carries to column a of the 8915-E. The IRS instructions, as I read them, requires the full distribution amount of $95K there.

qbteachmt

Level 15

"as if the entire distribution (Qualified Disaster Distribution Smart Worksheet Line B) is qualified"

Which it Is. It's all Qualified. That eliminates the penalty.

Then, you get to handle Tax Treatment.

"He only wants to claim $50K as eligible for deferral and spread over 3 years"

Then he intends to pay a penalty on the $45k difference? Or, are we confusing Qualified as in "penalty-free disaster reason" and Deferral as in "tax treatment?"

Don't yell at us; we're volunteers

qbteachmt

Level 15

Did you put the "Other" Code for form 5329? Look at this form for handling the penalty.

Don't yell at us; we're volunteers

M

msmith7305Author

Level 6

See above response.

Just-Lisa-Now-

Intuit Community Champion

The program doesnt handle it right because what youre asking to do its how its suppose to work.

A Covid distribution, you either spread it over 3 years or you dont.

Youre trying to only spread part of it, which doesnt seem to be an option.

Was part of that 95K NOT a Covid distribution?

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

BobKamman

Level 15

I feel left out this year because all of my clients stayed healthy and employed (if not already retired) and none of them took IRA distributions because of Covid problems. Most of them avoided taking RMD's altogether.

But I'm wondering if this is another case of thinking we have a tax on pieces of paper, rather than a tax on income. What if you input that single 1099 on two worksheets, $45,000 and $55,000, and didn't mark the first one as Covid-related? Certainly, if he had IRA accounts at two places, that would work. Will the E-Filing Police disallow it because there is some schema that prohibits two 1099-R's from the same place? They certainly have to allow two W-2s from the same employer; it happens regularly.

Sign up

Login with SSO

Let's get you signed in

Login with SSO