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    10% early withdrawal relief for covid related distribution

    NIUCPA
    Level 1

    Taxpayer (under age 59.5) received a 1099R for a qualified plan withdrawal with  distribution code 1 that qualifies as a covid related distribution. What form do I use so the distribution is not subject to the additional 10% tax? Form 5329?

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    athaureaux6
    Level 8

    Go to Form 5329, right after Line 1 there is a list of things that will waive the 10% penalty, scroll down and Look for Distributions Not subject to additional Tax, find Letter L, write the amount of the distribution and you will see that the software will write code 12 on Line 2 and waive the penaltly. There will be another way to do it once the software updates the 1099R on February 18. Hope it helps. If you look at the instructions of Form 5329, in the IRS website, Code 12 includes the Coronavirus Related Distribtuions Waiver. Thank you. 

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    8 Comments 8
    dkh
    Level 15

    Yes

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    athaureaux6
    Level 8

    Go to Form 5329, right after Line 1 there is a list of things that will waive the 10% penalty, scroll down and Look for Distributions Not subject to additional Tax, find Letter L, write the amount of the distribution and you will see that the software will write code 12 on Line 2 and waive the penaltly. There will be another way to do it once the software updates the 1099R on February 18. Hope it helps. If you look at the instructions of Form 5329, in the IRS website, Code 12 includes the Coronavirus Related Distribtuions Waiver. Thank you. 

    Alekrisum
    Level 1

    Thanks. Good job.  "Joe Fox"

    abs96
    Level 3

    I have same situation.  In addition to Form 5329, do you also have to complete Form 8915-E?

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    qbteachmt
    Level 15

    Form 5329 is for the penalty, if it applies or needs you to select "other" for the code for waiver.

    Form 8915-E is for the taxable amount being taxed and reported as a Disaster, over three years or optionally all in the first year.

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    staskocpa
    Level 2

    Has the software been updated yet to do any differently?  I see a disaster section on the 1099-R input form, but when you check the 2020 coronavirus disaster and the amount as exempt it removes the amount from income also, not just the penalty.

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    qbteachmt
    Level 15

    "and the amount as exempt it removes the amount from income also, not just the penalty."

    Go to the 8915-E and select if your taxpayer wants to pay all the taxes in 2020 by reporting all of the income in 2020. Otherwise, the standard disaster treatment is the three-year allocation split you see there. Pick one.

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    qbteachmt
    Level 15

    Oh: "but when you check the 2020 coronavirus disaster and the amount as exempt"

    It's exempt because of the covid disaster. it's not exempt in general. And there are eligibility and qualifications that must be met, to be considered "covid disaster" distribution. Confirm this qualifies.

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