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

[ChrisW]

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]

Try form 5329 - exception "other"

[Just-Lisa-Now-]

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

[garman22]

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]

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.

[abctax55]

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.

[IRonMaN]

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

[sjrcpa]

Thanks for being proactive on this.

[taxiowa]

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]

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- · Accepted solution]

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.

[ChrisW]

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]

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!!

[qbteachmt]

"because in ProSeries it removes 2/3 of the distribution to be taxed over the next few years"

Form 8915E, right below Line 5 is the option to pay tax on the whole thing, no 3 year spread.

[SoCal920]

Q+= when will the form 8915E be available in ProSeries?

[IRonMaN]

It's ready now.

[Just-Lisa-Now-]

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@SoCal920 wrote:

Q+= when will the form 8915E be available in ProSeries?

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Update your program, then fill out the disaster section in the 1099R worksheet and it will auto populate the 8915E.

[qbteachmt]

@SoCal920 

Yes, it's in the update last week.

https://proconnect.intuit.com/community/get-started/install-or-update-products/08?product=ProSeries%...

https://proconnect.intuit.com/community/proseries-tax-discussions/discussion/pro-series-update-not-w...

https://proconnect.intuit.com/community/update-products/help/how-to-refresh-proseries-updates/00/514...