8915-E

[cindy85296]

Can the federal tax withheld from the 1099-R's for Covid-related withdrawals also be stretched out to the 3 years allowable for the distributions?

[TaxGuyBill]

No.

[qbteachmt]

Tax amounts paid in by withholding are the same as estimates and the same as any other withholding process. They all are part of the tax year paid in.

[TAXOH]

If there is a refund you could apply part of the refund to 2021.

[IRonMaN]

Why would you want the government holding on to your client's cash for that long?  Tell your client to go down to the bank and open up a savings account to deposit the refund into so they have the money ready for the next two years.  They could even score bigger if they could find a bank that still gives away free toasters for opening up a new account.

[TAXOH]

I know some people that if it's in their hands they have to spend it. 

[qbteachmt]

"Why would you want the government holding on to your client's cash for that long?"

Well, the IRS is paying one of the highest interest rates on held refunds right now...

[IRonMaN]

I know some of those same people 😁

[IRonMaN]

"Well, the IRS is paying one of the highest interest rates on held refunds right now."

But if they are holding it for you, they aren't paying you interest on it.

[qbteachmt]

"Many individual taxpayers whose 2019 tax returns show refunds will receive interest from the IRS. The regular April 15 due date for filing returns and paying income taxes was postponed to July 15, 2020, as part of the IRS response to the COVID-19 pandemic. The IRS is required by law to pay interest on tax refunds due to individual taxpayers affected by the federally declared disaster who filed their Federal tax returns for 2019 on or before the postponed due date of July 15, 2020. The overpayment interest will generally accrue from the original April 15 due date, rather than the postponed due date of July 15.

Normally, the IRS is required to pay interest on a refund if the refund is issued after a statutory 45-day period. This rule does not apply to individual taxpayers who qualify for relief due to a federally declared disaster."

I like to think of the IRS Mail trailers as "money in the bank." 🙂

[cindy85296]

Thanks!